LEWISTON — Monday the campaign of independent U.S. Senate candidate Angus King made a media a splash when it plunked down seven years of federal tax returns, acquiescing to demands from a rival.
King, a former Maine governor, produced the documents after the Democratic candidate state Sen. Cynthia Dill challenged the campaigns of King and Republican candidate and Secretary of State Charlie Summers to release 10 years of tax returns.
A summary that accompanied the release of King's tax returns stated King's effective tax rate, meaning the percent of his income paid in taxes, was between 20 and 26 percent over that 7-year period. But some are now questioning the way that rate was calculated.
King's campaign calculated the candidate's effective tax rate by dividing the taxes he paid by his taxable income.
But when Republican presidential candidate Mitt Romney's effective tax rate was calculated and called into question by the press, it was based on a formula that divided the taxes Romney paid by his adjusted gross income.
In other words, King's formula calculates his tax rate based on taxable income and not on his gross income.
Depending on who you ask, either formula is valid but both show King and Romney paying about the same effective tax rate.
Using King's formula, Romney's effective tax rate would have been 21.5 percent. If you use the Romney formula on King's taxes, his effective tax rate would be 13.8 percent.
Romney paid $1.9 million in taxes on $13.7 million of adjusted gross income in 2011.
King paid $67,817 in taxes on $490,486 of adjusted gross income in 2011.
King's campaign spokeswoman Crystal Canney said they depended on King's accountant's summary and estimation of his effective tax rate.
Based on tax returns released by his campaign Monday, Summers paid $8,055 in taxes on income of $102,583 in 2011.
Under the King formula, his effective tax rate on a taxable income of $74,371 would have been just over 10 percent.
Using the Romney formula, Summer's effective tax rate, based on his adjusted gross income was 7.8 percent.
Summer's campaign staff said they weren't necessarily criticizing King's data but the way it was presented and they wanted to point out that Romney, when using the King formula, actually paid a larger percentage of his income in taxes than King did.
"He set this discussion up by sending a press release out saying something about Charlie Summers' capital gains plan would mean Mitt Romney would pay even less tax," Summers' campaign manager Lance Dutson said. "So they started the comparison of the Mitt Romney thing themselves and now it turns out he pays less tax than even Mitt Romney pays."
Dutson also criticized the way the information was released and presented, first to the media, and then to the general public. He said by the time anybody was able to carefully look at the data, media in Maine had already reported King's effective tax rate based on the formula using taxable income, which skews his rate upward.
"I think it was deceptive the way they put it out," Dutson said. He said the original challenge from Dill, which Summers agreed to, was that everybody would release their data together and agree on how and where it would be presented, and also independently scrutinized.
"Everybody gets, in general, what the deal is here," Dutson said. "Angus and his campaign understand what is implied by effective tax rates but when they use their own formula and didn't use common parlance on it, it means they were deliberately out there trying to mislead." Dutson said rather than release the tax data together with the other campaigns they released it under their own terms and their own definitions.
"People should be concerned about that level of manipulation," Dutson said. He then listed other things he said the King campaign has done in recent weeks including editing out the negative parts of a news story that was republished, briefly, on the campaign's website to promising to not engage in negative television advertising and then doing so. Dutson said he sees a pattern emerging that shows King, "saying one thing and doing another."
He said the way the tax data was released is just another example of that.
"And this coming from a guy who was supposed to be above this political fray and yet he's got this campaign that continually seems to be wrestling down in the mud," Dutson said.
A release issued by King's campaign on Sept. 23 did reference Romney and statements Summers made regarding capital gains taxes during a debate in Lewiston earlier in September.
The release noted King could not support, "lowering the capital gains tax rate for the country's most wealthy people, as was proposed in last week's Lewiston debate by Republican candidate Charlie Summers."
The release noted Summers' statement came just after Romney's release of his personal financial records, "showing he is taxed at a much lower rate than many working Americans."
"Investment income should be taxed at the same rate as the income tax of someone who works in a factory, office, or any other job in Maine," King said in a prepared statement. "The idea that investment income should be taxed at a lower rate doesn't make any sense and is bad policy."
Steve Colburn, an accounting professor, at the University of Maine at Orono, said the calculations done by both Romney's and King's accountants appear to be correct but the method used by King's is the most common way to calculate effective tax rate.
"There's lots of different ways you can play with the numbers," Colburn said and which formula used may depend on what's the most "politically convenient" for the candidate in question.
He said he doesn't understand why Romney would choose the formula that shows him paying a lower effective rate but clearly a letter from the accounting firm Price Waterhouse Cooper, which crunched the numbers for Romney, indicates they did so based on his direction.
Colburn also said that the King method for determining the ETR is commonly accepted and used but from a strict economics perspective, it's not really the most "correct" way to calculate the effective tax rate.
"It's more of an average rate, the effective rate from an economics point of view — and I'm not an economist — but I think the economists would view the effective rate by whatever you pay in total taxes compared to all of your income."
Colburn said the bigger issue at stake here is whether investment income, which both King and Romney document, should be taxed at the same rate as other income. King has said it should, which ultimately means his own taxes would go up.
Canney, King's campaign spokeswoman, said comparing Romney's tax returns to King's was not an apples-to-apples comparison.
"Romney has only released two years (of tax returns), I believe and Angus has released seven," Canney said. She said King's comments about Summers and capital gains taxes were in response to Summers proposing capital gains taxes be eliminated altogether.
Meanwhile, King's accountant, Scott Small, told The Associated Press that King's effective tax rate would have been lower had he calculated it using the method Romney used.