WASHINGTON — As President Obama and likely Republican presidential nominee Mitt Romney battle over tax fairness and who has the lowest income tax rate, it turns out they both pay less in taxes than the average American who earns much less.
Obama and his wife Michelle reported an adjusted gross income of $789,674 in 2011 and paid an effective tax rate of 20.5%, or $162,074. They donated $172,130, about 22% of their adjusted gross income, to 39 different charities, the White House said.
Former Massachusetts Gov. Romney, who has not yet released his 2011 tax return but is estimated to be worth $250 million, paid an effective tax rate of 13.9% or just over $3 million, according to his 2010 filing. His 2010 adjusted gross income was $21.6 million. Romney and his wife Ann donated $2.9 million to charity.
By comparison, the effective tax rate in 2010 for those making more than $250,000 was 23.4% and their share of all income taxes paid was 45.7%, according to the Tax Foundation, a tax research group. The effective tax rate for those making more than $50,000 was 14.1%, and their share of all income taxes paid was 93.3%.
Of the 143 million tax returns filed in 2010, 2.7 million individuals earned more than $250,000 and 48.9 million individuals earned more than $50,000, said Will McBride, a Tax Foundation economist.
Romney maintains his tax rate is so low largely because the primary sources of his income derive from dividends, profits and interest on investments, which are subject to a lower 15% capital gains tax.
Obama did not have tax-exempt interest while Romney listed $557 as tax-exempt interest in his 2010 filing.
All week Obama and Vice President Joe Biden have been touting their so-called Buffet rule, which would impose a minimum 30% tax rate on taxpayers whose adjusted gross income exceeds $1 million, including capital gains and dividends.
The Buffet Rule is named after billionaire investor Warren Buffet, chairman of Berkshire Hathaway Inc., who complained he pays an effective lower tax rate than his secretary and urged Congress to require the wealthy to pay their fair share of taxes.