In addition to the federal estate tax of 40 percent (which is fourth highest in the OECD), many U.S. states levy their own estate and inheritance taxes. Estate taxes are charged against the estate regardless of who...
- Wall Street Journal quotes William McBride on Effective P...
Wall Street Journal quotes William McBride on Effective Personal Tax Rates
By JOHN D. MCKINNON And ALICIA MUNDY
Rep. Paul Ryan and his wife paid a higher tax rate for 2011 than Mitt Romney and his wife on significantly less income, according to tax returns that the Romney campaign released late Friday.
The Ryans also had to pay more in tax than they originally thought because of income from a trust that they didn't initially include on their return. They filed an amended return later in the year to correct the omission.
The returns showed that Mr. Ryan and his wife, Janna, paid an effective tax rate of about 20% for 2011, and about 17.4% for 2010. They reported total tax of $64,764 on adjusted gross income of $323,416 for 2011, and total tax of $37,457 on income of about $215,417 for 2010. The returns show the Ryans donated $12,991 to charity in 2011 and $2,600 in 2010.
That compares to an estimated 15.3% for the Romneys on income of $20.9 million in 2011 and a 13.9% tax rate for 2010. Mr. Romney hasn't released his final 2011 tax return, but has said that he will do so when it is completed.
At least two factors contribute to Mr. Romney's relatively low effective tax rate: Much of the Romneys' income comes from investments that are taxed at favorable rates, and the Romneys have given substantial amounts to charity—about $4 million in 2011, according to an estimate.
The Ryans had to file the amended return in May 2012 because they didn't initially report income from a trust created after Mr. Ryan's mother-in-law died in 2010.
A Ryan spokesman, Brendan Buck, said that an informational form from the trust "had not been received by the [tax] filing deadlines…and therefore was omitted on the originally filed documents." When the form was received later, "the omission was realized and corrected," he said.
The change resulted in about $61,000 in additional income for the Ryans, and almost $20,000 in additional tax, according to a summary. But the Ryans had overpaid their taxes sufficiently so that they didn't owe additional payments, according to return information, though they did report a penalty of $59 for underpayment of estimated tax.
A person familiar with the matter said the trust operates on a tax year that ends on March 31, complicating the Ryans' tax-filing process.
Mr. Ryan also amended his federal financial disclosure documents to show the addition of the trust, valued between $1 million and $5 million. The amended disclosure form was reported earlier this week by USA Today.
The changes appear to have occurred while the Romney campaign was vetting vice-presidential candidates, but it is unclear whether the vetting process was related to the amendments.
The Ryans' estimated net worth exceeds $4 million, and Mr. Ryan's overall assets, including the trust, range from about $2 million to $7 million, putting them in the ranks of America's wealthiest families but well below Mr. Romney's net worth of about $250 million.
The amended federal financial forms were hand-delivered June 6 to the Clerk of the House, along with a letter that said the mistake was an "inadvertent omission." The trust, created in 2010 when Mrs. Ryan's mother, Prudence Little, died, provided the Ryans with income of between $100,000 and $1 million last year, according to Mr. Ryan's letter. The federal disclosure forms show ranges of values of assets and income, not exact figures.
In addition to his wife's inheritance, Mr. Ryan has inherited money from his family, and the Ryans have investment income.
Amendments to congressional financial disclosure forms are not unusual, though the trust represents a significant part of Mr. Ryan's wealth.
A campaign-finance lawyer who advises Democratic politicians said that despite the size of the trust, the omission likely doesn't raise legal or ethics issues, now that the forms have been amended. The trust is exempt from having to identify its assets.
Tax experts also said the Ryans' returns seem unremarkable.
In 2010, the average effective tax rate for households making $250,000 or more was 23.36%, and for those making between $200,000 and $250,000, it was 16.91%, said William McBride, chief economist at the Tax Foundation, a nonpartisan research group.
A version of this article appeared August 18, 2012, on page A5 in the U.S. edition of The Wall Street Journal, with the headline: VP Candidate Paid Higher Tax Rate Than Romney in '11.
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