Ok, I’ve found the answer to my earlier question about what “effective tax rate” means. Mitt Romney’s 2011 returns, and a letter from Price WaterhouseCoopers (Pwc) “summarizing” what he paid in previous years, have now been posted online.
Here’s what PwC’s letter says about what “effective” rate means (or “effective federal personal income tax rate,” to be specific):
“The lowest of any annual “effective federal personal income tax rates” for any year during the period is 13.66%. As you requested, we computed each annual “effective federal personal income tax rate” as total tax owed divided by adjusted gross income as shown on the federal income tax returns as prepared.”
So it’s total tax divided by adjusted gross income (AGI). AGI isn’t the same as “taxable income,” which subtracts larger amounts to account for charitable donations and other common deductions. Instead, AGI is simply gross income minus a few standard deductions, from a specific list (which doesn’t include typical big deductions like charitable ones).
So it would appear that this “effective rate” is calculated based on something close to his actual gross income. (According to Romney’s 2011 and 2010 returns, his AGI was only very slightly lower than his gross income.) But we can’t know that for sure, because Romney won’t reveal his earlier returns, so we can’t tell how much, exactly, was deducted from his gross income to calculate the AGI used in all those “effective tax rate” calculations.
So, what rates did Romney pay vs. his ACTUAL gross income (not his “adjusted” one) during that 1990-2009 period? That’s still an unanswered question.
