Mr. Romney’s returns

Chicago Tribune | Editorial

Republican presidential candidate Mitt Romney hemmed and hawed when he was asked during a Monday night debate if he would release his tax returns. By Tuesday, he apparently was feeling the pressure to stop equivocating. He said he will release one year of tax forms around filing time in April.

He also revealed that he pays an effective federal tax rate of close to 15 percent.

That’s going to sound like a sweet deal to most Americans, who earn their incomes largely from wages and salaries. Many pay more than an effective rate of 15 percent because income is taxed at graduated rates that rise to 35 percent. Capital gains, which include profits from the sale of mutual funds, real estate and other investments, are taxed at 15 percent. It is likely that Romney derives much of his income from capital gains.

One year’s return, released in April? It still sounds like Romney will be a day late and a dollar short. Figuratively speaking.

Romney needs to do much more and do it much faster. He ought to release several years of returns, right now, so voters have the information. By April, the Republican nomination may be sealed … which might be what he’s counting on. He won’t be doing the Republicans any favors by waiting, though, if his tax returns have some unwelcome surprises.

It is uncomfortable business putting your financial life in the public eye, but that has become the common course in high-stakes political campaigns, and with good reason.

What’s uncomfortable? Ask former Vice President Al Gore, who came under fire in 1998 when he released a return that showed he had given only $353 to charity the previous year. He bumped that up to $15,000, or nearly 7 percent of his income, in each of the following two years.

Or ask Illinois Sen. Bill Brady, who initially refused to disclose his taxes when he ran for governor in 2010. Brady grudgingly gave in under pressure, though he allowed reporters only three hours to scrutinize his returns in his office before he locked them up again — no copying allowed.

Turns out, because of business losses, Brady paid no federal or state income tax in 2008 and no federal income tax in 2009. Brady was a home builder, and when the real-estate market collapsed, he took advantage of a provision in the federal stimulus law that provided favorable tax treatment to small businesses. He had to defend himself — the guy calling for tax cuts hadn’t paid taxes — but a lot of people understood that companies face ups and downs.

Brady’s now-you-see-them-now-you-don’t routine hurt his candidacy, though, because it looked like he had secrets to hide.

So Romney would be wise to release his tax returns now and have an honest debate with the nation about tax policy. We need to have that debate, as we discuss in the other editorial on this page.

For his part, President Obama released tax returns going back to 2000 when he ran for president and has released his returns each year he’s been in the White House.

If we’re going to have that honest debate on taxes, it’s best to get in the open how tax policy personally affects a candidate.

Obama has urged lawmakers to raise the capital-gains tax rate to 20 percent from 15 percent. That would still leave it below the higher end of marginal rates on income, an acknowledgment that high capital gains tax rates do have a negative effect on investment, which has a negative effect on job creation.

Most of the Republican presidential candidates would eliminate taxes on capital gains, but Romney is the outlier. He would retain capital gains taxes for households that earn more than $200,000 a year at the current 15 percent rate.

Releasing Romney’s returns will force him to do some explaining, no doubt. But it will come as no secret to voters that he’s a wealthy man. Not that the Obamas have been suffering. The president and his wife reported $5.5 million in adjusted gross income in 2009 and $1.73 million in 2010. Since most of that has been based on salary and book sales rather than investment gains, their effective tax rate has been higher than Romney’s 15 percent.

The questions will keep coming for Romney. Far better to give voters information now. Then let them judge how the candidates’ tax proposals would affect them — and more important, how they would affect the country.