Tax Returns Show Romney's Complicated Finances

Republican presidential candidate Mitt Romney earned more than $42 million over the past two years — the bulk of it from an array of stocks and investment funds. And he paid about 15 percent of what he made in taxes. The release of some 500 pages of tax returns give a much fuller picture of how he made his money and what he did with it.

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RENEE MONTAGNE, HOST:

We now know that Republican presidential candidate Mitt Romney made over $42 million over the past two years, most of it from an array of stocks and investment funds. We also know that he paid around 15 percent in taxes on that income. Romney gave in to his political rivals yesterday when he released some 500 pages of tax returns. And those pages gave a much fuller picture of his income and what he's done with it. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: Romney had planned to wait until April to release his taxes, when he hoped to have the nomination sewn up. But after his second-place finish in South Carolina this weekend, he decided to try to get the issue behind him. Yesterday, he released his 2011 estimated return, his 2010 return, as well as the returns for his charitable foundation and three family trusts.

Tax attorney Jeff Kolodny, of Cozen O'Connor, says the fact that the returns are so voluminous underscores how complex his finances are.

JEFF KOLODNY: He's got a lot of different kind of investments that are somewhat sophisticated, and there's a lot to report about them. So it's not a function so much of his wealth, as much as the number of different investments that generate income.

ZARROLI: Romney, who's worth as much as a quarter billion dollars, made a fortune from his involvement with the private equity firm Bain Capital. Even though he was long gone by 2010, he continued to take a part of the profits. He also made money from numerous foreign and domestic stocks, hedge funds and investment funds - much of them owned through a pair of blind trusts.

Alan Weiner, of Holtz Rubenstein Reminick, says these are commonly used by politicians who want to put a firewall between themselves and their assets.

ALAN WEINER: The idea is if somebody's invested in the XYZ Company and knows they have an investment in the XYZ Company, and if they're in government perhaps they would do something that might benefit the XYZ Company.

ZARROLI: There was nothing especially surprising in the returns. And several tax professionals said at first glance they saw no red flags. Romney had already acknowledged that he paid only around 15 percent of his income in taxes.

Jeff Kolodny says that's because much of the money he took in came from investments.

KOLODNY: It's the nature of the income that he's earning. Long-term capital gains are taxed at a much more favorable rate than ordinary income.

ZARROLI: Romney has taken a lot of criticism for paying such a low tax rate and his rival, Newt Gingrich, has pointedly noted that he paid a much higher rate. But over time, Congress has slowly lowered the capital gains tax rate to where it is now.

And Alan Weiner says fair or not, Romney was operating within the law.

WEINER: If Congress changed the law then this would be ordinary income. I mean you speak to the future. I mean the past is the past.

ZARROLI: The returns also show that Romney and his wife, Ann, made some $7 million in charitable contributions. Most of it went into their family foundation, which in turn gave money to numerous causes. They included the Mormon Church, Harvard Business School, Boys and Girls Clubs, City Year and the George W. Bush Library.

Until last year, the Romneys also had nearly a million and a half dollars in a Swiss bank account. Asked why they had closed the account, their trustee said it was no longer serving any particular purpose. But the move came at a time when the U.S. government was cracking down on Americans with Swiss accounts. And that was generating some negative headlines.

Again, Alan Weiner:

WEINER: Over the last several years, Swiss bank accounts had this connotation, and anybody that has a Swiss bank account is a bad person because a lot of people hid income in Swiss bank accounts.

ZARROLI: Romney's campaign says he reported the account to the government and was doing nothing wrong. But with the Romneys' wealth likely to be a an issue in the campaign he may well have decided that having a Swiss bank account was politically risky. And given the way this race has gone that would have been a smart calculation.

Jim Zarroli, NPR News, New York.

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