How Mitt Might Have Paid Little or Nothing in 2008 and 2009

From “Here’s How Mitt Romney Might Have Paid No Taxes,” Rick Newman, U. S. News & World Report:

The clue comes in Schedule D of his 2010 return, in which he claimed a $4.8 million loss carried over from prior years. That helped reduce his tax bill for 2010, in which he paid $3 million in taxes on $21.7 million of income, for an effective tax rate of 13.9 percent.

The carryover means that Romney probably claimed a much bigger loss a year or two earlier, which could easily have pushed his tax rate for 2008 or 2009 down to the low single digits. Most investors lost money in 2008, the year that Lehman Brothers collapsed and the S&P 500 stock index fell by 37 percent. Romney was probably no different.

“During bad years, wealthy investors often use a legal strategy called ‘tax harvesting’ in which they sell weak investments at a loss, which they can use to offset the tax they’d need to pay on gains from better-performing investments. The loss can be carried forward, to help lower the tax bill in later years when investments might have done better.

“About half of Romney’s income in 2010 came from capital gains. If that were zeroed out in 2008, say, on account of the crumbling economy, it could have cut his income for that year to $10 million or less, with a huge deduction for a capital loss. Combined with the same sorts of charitable donations and other deductions he claimed in 2010, that could have pushed his tax burden close to zero. If Romney’s losses were big enough in 2008, he could have carried a portion of the loss forward into 2009, helping lower his taxes then, too. The fact that the loss carryover appeared on his 2010 return suggests that may well have happened.”  Emphasis added.

2 comments on “How Mitt Might Have Paid Little or Nothing in 2008 and 2009

  1. Patti Kuche says:

    Creative accounting 101!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s