Mitt Romney's Tax Returns - NYTimes.com January 17, 2012, 3:01 pm Having strongly suggested at Monday night's debate that he would release his 2011 tax returns in April, Mitt Romney needs to begin inoculating himself against the backlash that will almost inevitably ensue when the public sees how much annual income he has, where it comes from and how little tax he pays on it. He started this process Tuesday morning, when he told reporters in South Carolina that his effective tax rate is about 15 percent. An effective tax rate of 15 percent means that most of his income comes from investments, as he acknowledged Tuesday. The rate on such capital gains income is far lower than the top rate of 33 percent on ordinary income, the kind that most people who receive paychecks have to pay. Investment income is also not subject to the payroll tax. As a result, Mr. Romney is one of the 200,000 millionaires in America who pays a rate less than that of a taxpayer making $100,000. And if his rate turns out to be lower than 15 percent (a feat usually achieved through various tax avoidance schemes), he will be one of the 22,000 millionaire households paying less than half the rate of a middle-class family. Based on the vague information Mr. Romney has already disclosed about his 2010 income, Citizens for Tax Justice estimated last year that his rate would be 14 percent. If that is the case, he would be subject to the "Buffett rule" - a new minimum tax rate for people making over a million per year - proposed by President Obama. Mr. Romney opposes the rule, and any other effort to raise taxes on the wealthy. When asked about it, he routinely deflects the question and says that government needs to be shrunk. But once it is clear that such a rule would directly affect him, he won't be able to bat it away quite as easily. The Super PAC supporting President Obama already has a video out entitled "the Romney rule." There may be another reason why Mr. Romney is already trying to build up immunity to the coming Democratic onslaught over his income. As The New York Times reported last month, he negotiated a retirement deal with Bain Capital, the private equity firm he ran, that provides him with a substantial share of Bain's profits every year. That probably means he can take advantage of the low 15 percent tax rate on carried interest, the special tax break for hedge fund and private equity managers. Hedge-fund partners like to claim they deserve an investment-level break because they put their money at risk, but most people outside the business - including the United States Tax Court - have said that it is really pure compensation. If true - and this may become clearer depending on how much of his tax return he releases - he will then displace Warren Buffett as the country's most prominent example of elite tax treatment. Mr. Obama has proposed ending the break on carried interest, one of the principal reasons why the incomes of the very richest Americans has soared in recent years, at a time when ordinary American incomes have been stagnant or fallen behind. The president is certain to amp up his demand once it is clear it will directly affect his likely opponent in the general election. The concept of income inequality is about to become far less abstract.