Republican presidential candidate Mitt Romney bowed to political pressure and cracked the books on his personal finances on Tuesday, releasing tax returns showing he will pay $6.2 million in taxes on $42.5 million in combined 2010 and 2011 income.
Unlike most Americans who earn a paycheck, Romney gets the majority of his income from investment profits, dividends and interest. One of the wealthiest men ever to run for the White House, he made his fortune buying and selling companies as a private equity financier with Bain Capital.
Romney and his wife Ann paid an effective tax rate of 13.9 percent in 2010 and expect to pay a 15.4 percent effective tax rate when they file their returns for 2011.
Those rates are roughly in line with the effective tax rates paid by most Americans, but they are far below the top income tax rate levied against wages, which is 35 percent, because the U.S. tax code favors investment income over wage income.
Romney released the tax returns after a week when his chief rival for the Republican presidential nomination, former House of Representatives Speaker Newt Gingrich, questioned whether Romney was hiding information about his finances and cast him as out of touch with most Americans.
Romney's estimated net worth is $190 million to $250 million.
The candidates are engaged in the state-by-state battle for their party's nomination to face President Barack Obama, a Democrat, in the November 6 election. The next contest is the Florida primary on January 31.
Gingrich's attacks helped him upset the former Massachusetts governor in the South Carolina primary on Saturday. Since then, Romney has fired back with attacks questioning Gingrich's character, judgment and lucrative work as a consultant.
Romney's release of his tax returns is meant to try to blunt Gingrich's criticisms on that front, but the returns could further fuel a national debate about the fairness of the tax code and rising U.S. income inequality.
Romney campaign officials said his tax rate is based mostly on blind trust investment income. They said he makes no decisions on how his money is invested. They said his holdings include amounts in funds based in the Cayman Islands and other overseas entities.
The Caymans holdings and holdings in a Swiss bank account - which was closed in 2010 after an adviser decided it could be politically embarrassing to Romney - were reported on tax returns and were not vehicles to avoid taxes, the advisers said.
Regardless, the emerging picture was of a man of great means who contributes mightily to charity. The tax returns showed he and his wife contributed $7 million in charity over the two years, much of it going to the Mormon church. That represents more than 15 percent of the Romneys' income for those years.
Romney had total capital gains income of $12.5 million for 2010 and an estimated $10.7 million for 2011.
Top campaign officials and the director of Romney's blind trust, Brad Malt, briefed Reuters on the details ahead of a more general release of the information on Tuesday morning.
Campaign counsel Ben Ginsberg, asked why Romney was not releasing tax records for the years in the 1980s and 1990s in which Romney made his fortune at private equity firm Bain Capital, said the two years covered by the tax returns should give a broad picture of Romney's financial situation.
"We're not going to get into the game of once you give them something, they demand more," Ginsberg said. "This is a fulsome release and we're proud of it."
The tax issue may have been a factor in Romney's loss to Gingrich in the South Carolina primary last Saturday. It became a distraction to Romney's campaign, and Romney's fuzzy answers on when and if he would release his records aggravated the problem.
First he said he might release them, or might not. When the questions kept coming, he said he would put them out in April, after his 2011 forms were completed. Only after he was defeated in South Carolina did his aides say he would release them this week. Gingrich has released his returns for 2010, but has not released an estimate for last year, as Romney did.
Long considered the front-runner for the 2012 Republican presidential nomination, Romney was staggered by Gingrich's lopsided win in South Carolina, and is looking to regain enough momentum to defeat Gingrich in Florida.