Home Forums Hunting & Shooting Canada Mitt would pay less in Canada.

If Mitt Romney were Canadian, he would pay even less tax

Under increasing pressure, Republican presidential candidate Mitt Romney this week released both his 2010 tax return as well as his 2011 estimated return.

While his income numbers were staggering, placing Romney among the wealthiest income-earners in America, it was the relatively low taxes he paid and is expected to pay for 2011 that has been the subject of intense water cooler discussions.

In 2010, the presidential hopeful had reported gross income of US$21,661,344, made $2,983,974 in charitable donations and paid $3,009,766 in federal taxes, resulting in the effective 13.9% tax rate that has raised the ire of many hard-working Americans who make substantially less but pay tax at a higher effective rate.

Romney�s income for 2011 is estimated to be slightly less, at US$20,901,075. Last year he made charitable gifts totaling $4,020,572 and is estimated to pay federal tax of $3,226,623 making his 2011 effective tax rate 15.4%.

The issue of Romney�s wealth has dogged him throughout his campaign to be selected as the Republican presidential nomination, as Americans wondered whether his enormous wealth, estimated at more than US$250-million, could impede his ability to be president and relate to the average American. Much of his wealth can be attributed to being a founding partner of Bain Capital, a venture capital and private equity firm he started in 1984.

But this week was the first real glimpse into his finances, he has never released his personal tax info before, even when he was the governor of Massachusetts.

On Tuesday, Romney�s campaign office released over 500 pages of tax documents. His 2010 tax return, prepared by the accounting firm PricewaterhouseCoopers, was 203 pages. Buried in all those pages are disclosure about a Swiss account that was closed in 2010 and accounts in Bermuda and the Cayman Islands.

For many Americans, his tax rate seemed low, considering the U.S. top personal tax rate in 2010 and 2011 was 35%. But Romney earned more than half of his income from capital gains and dividends which are taxed at only 15%.

Contrast Romney�s return with current President Barack Obama, who disclosed a gross income of $1,728,096 for 2010 when he released his returns in April of this year. By contrast, much of Obama�s income comes from sales of his books �Dreams from My Father� and �The Audacity of Hope.� In 2010, he paid $453,770 in federal taxes, making his effective tax rate 26.3%.

But if Romney were filing Canadian taxes, we estimate he would have paid even less, even though Canada�s tax rates are generally considered to be substantially higher than the U.S.

Running the U.S. numbers on a Canadian return, assuming no foreign currency adjustment and assuming his dividends would be Canadian dividends had he lived in Canada, Romney would have paid $2,973,021 of Canadian federal tax in 2011 on his $20.9-million of income, which translates to an effective federal tax rate of only 14.2%, more than a percentage off the 15.4% he is forecast to pay.

Romney and other rich Americans and Canadians are able to pay a lower tax rate because of how investment income is taxed as well as the value of the charitable donation tax credit.

In Canada, dividend income is eligible for a dividend tax credit while capital gains are only half taxable. In other words, for a top income earner, Canadian dividends are taxed a top federal rate of only 17.72% (2011) while capital gains for a high income earner would be taxed at half the top marginal tax rate or 14.5% (i.e. 50% X 29%). Charitable donations above $200 are eligible for a 29% federal donation tax credit.

When we consider that Romney�s 2011 income was made up of US$3.1-million in dividends and $10.7-million worth of capital gains, combined with $4-million of charitable gifts, it�s possible to see how Romney or, for that matter, anyone who earns the bulk of their income from investments, ends up paying very little tax.

The Romney story also serves as an important reminder of the difference between your marginal tax rate, which is the amount of tax you pay on each additional (�marginal�) dollar of income above a certain level and your effective tax rate, calculated by dividing your tax liability by your income.

For most Canadians, your average tax rate is significantly lower than your marginal tax rate, especially if the bulk of your income comes from tax-preferred investments.

But the last word goes to Romney himself. As he said in Monday�s debate on the eve of releasing his tax returns, �I pay all the taxes that are legally required and not a dollar more � Will there be discussion? Sure. Will it be an article? Yeah. But is it entirely legal and fair? Absolutely.�

Jamie Golombek, CA, CPA, CFP, CLU, TEP is the Managing Director, Tax & Estate Planning with CIBC Private Wealth Management in Toronto.

Frankly, who cares how much the guy makes.
I actually think he and everyone else should suffer through less tax, and less government.

Vote Ron Paul.

In Canada, there are no states that have 0% provincial tax like Florida, you can add an average of 50% to the federal tax he would pay. It's also worth noting that he gave 15% of his income to charity having a huge effect on his taxes.

I also don't really care what his tax rate is, he is a very wealthy self made man who earned his fortune inside the rules of the day, he also pays his taxes as per the rules of the day. He came from a wealthy successful family, but I am pretty sure not the $250-350 million kind of wealth.

Why is it that every President in the USA has to be wealthy? Every single wealthy person I have met in Canada and USA will screw even widows and pensioners every chance they get tio make a buck. As soon as I see wealth like that - I think another flippen crook circling the feed trough.

While I do not like Mitt, I have no problem with his wealth or what he pays in taxes, as long as he pays what he is legally obligated to pay. It seems to me as if he follows the law in this matter unlike a lot of the Democrats that are always nipping at his heels. miles

I also have no problem with his wealth just surprised that he would pay less tax in Canada than USA.

I don't care what they do down there.

Strange, no mention in the media of the $4 million he gave to charity. How much did Obama give to charity?

As they are our largest trading partner by a long shot, I care very much what they do down there.

Yep, and how their military does as well.

IMO if every American contributed even 10% of their income to charity then we wouldn't have the government providing all these social services...

If every American got a job there would be no need for charity. Nothing lowers a person like accepting handouts.

I know numerous people who would rather accept a "handout" from the church or a charitable organization, rather than accept welfare from the government.

Nothing lowers a person's morale quite like having to pay more taxes so somebody can get more welfare $$ just by having more babies...

I'll contribute all I can to charity, at least those people appreciate it!

My memory of his last tax return, he and Michelle had income of about $1.5mm and they donated about 10% of their income to charity.

Obama's tax return is public record, people don't talk about it because there is nothing to talk about. Before he was elected she made more than him, his income outside his salary was royalties from his books.

The government would still collect as much in taxes. They would just spend waste it on something else.

No argument there!

Wonder how Donald Trump would do in Canada?

Poorly.

Not to wake you guys up or anything but he is in Canada in a big way, has been for awhile.

Trump Towers in Toronto

Never mind Donald....does Ivana make it up to Canada?? Maybe she would like to come to our hunting camp in the wilderness? LOL