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Posts Tagged ‘rick santorum’

And then there were two.

/eagerly awaits flood of angry emails from Ron Paul supporters. 

Rick Santorum dropped out of the presidential race today, presumably because he needs all the time he can get over the next few days to prepare his own tax return. This leaves Mitt Romney as the GOP nominee, barring some sort of last-minute revelation painting him as a baby-seal clubber, Tiger Woods-grade adulterer, or Al-Qaeda sympathizer. 

With Santorum’s departure dies the dream of 12% long-term capital gains tax rates, the elimination of the “marriage tax penalty,” and a 0% tax rate for U.S. manufacturers.

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After the latest round of tax reform one-upmanship displayed by the presidential candidates — specifically President Obama revealing his plan to cut the corporate rate to 28% and Mitt Romney’s promise to chop individual rates by 20% across the board  — we can once again update our side by side comparison of the tax proposals floated by President Obama, Newt Gingrich, Mitt Romney, and Rick Santorum.

So with the caveat that these promises are subject to change every time a candidate gets tongue-tied during a debate, click here for a PDF of the comparison: 2012 Presidential Candidates – The Tax Proposals

Alternatively, below are JPEGs. Click to enlarge.

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Last night, Republican Rick Santorum, who shocked political pundits by toppling Mitt Romney and Newt Gingrich during his recent run of victories in Minnesota, Colorado and Missouri, finally relented to what has become a rite of passage for any serious presidential candidate: the public release of  his tax returns.

After Santorum published his 2007, 2008, 2009 and 2010 federal returns online (though some attachments were missing), we were asked to review the returns for Bloomberg. The verdict? They were remarkable in just how unremarkable they were.

Santorum’s returns stood in stark contrast to the much-publicized returns of leading Republican candidate Mitt Romney, both in terms of magnitude and composition:

-Whereas Romney’s AGI exceeded $20,000,000 in 2010, Santorum’s hovered around $900,00 for the four-year period.

-As opposed to Romney — whose income was largely taxed at the 15% rate on long-term capital gains and qualified dividends — Santorum generated almost no income subject to preferential rates (zero long-term capital gains and negligible (less than $700) qualified dividend income over the four-year period.)

-Instead, the bulk of Santorum’s income was realized in the form of wages (approximately $300,000 per year) and self-employment income (approximately $600,000 per year), which are subject to tax at ordinary rates. As a result, Santorum’s effective tax rate averaged close to 27% over the four-year period, which is nearly double Romney’s 2010 rate of 13.9%.[i]

-Also in contrast to Mitt Romney, Santorum’s returns contained no reference to family trusts or foreign investments. That’s neither good nor bad, just a fact, and one that is likely to make Santorum more identifiable to many taxpayers.

Also worthy of note:

-Santorum has seven kids, which may explain why he’s pushing to triple the personal exemption amount.

-Santorum paid AMT in 2006, but narrowly avoided it from 2007 through 2010. This was a bit of a surprise, as his large deductions for state taxes and personal exemptions (both AMT adjustments) made Santorum a prime candidate to be subject to the minimum tax. Because Santorum’s income steadily climbed into the higher tax brackets, however, his effective rate exceeded the 28% maximum AMT rate. Perhaps these close calls were the impetus for Santorum’s promise to do away with the AMT should he be elected?

-Despite being one of only four men left in the conversation to be the next leader of the free world, Santorum prepared his own tax returns. The thought of a man with AGI approaching $1,000,000 and such lofty political aspirations cranking out his own Schedule C on Turbo Tax is both adorable and dangerous, like a kitten playing with a handgun.

-Perhaps because the returns were self-prepared, Santorum deducted $85,000 in mortgage interest in 2009, an amount that borders on impossible given the $1,100,000 maximum amount of primary residence debt permitted to be taken into account under I.R.C. § 163. Either Santorum got a raw deal in the form of a 7.5% jumbo interest rate on his home, or he really needs to read this post.

-With AGI of nearly $1,000,000 per year but no investment income, Santorum’s tax returns beg the question: Where does he keep his money? Based on a quick perusal of his financial disclosure, it appears Santorum has $50,000-$100,000 in a checking account, $100,000-$250,000 of Universal Health Systems stock, $500,000-$650,000 in various IRA investments, and $250,000 in Section 529 plans so his seven kids can go to college and form a kick-ass volleyball squad.

How Santorum’s returns are received by the media and taxpaying public will begin to be revealed tomorrow, but this much is certain, no one will be able to attack his effective tax rate or use of loopholes favoring the wealthy.


[i] As I’ve stressed before, any discussion of Romney’s effective tax rate really should take into consideration the corporate level tax paid by his many investments.

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