Gingrich victory in South Carolina jolts Republican race

Newt Gingrich

(Reuters) - Republican presidential candidate Newt Gingrich trounced frontrunner Mitt Romney in South Carolina on Saturday in a jarring victory that indicates the party's battle to pick a challenger to President Barack Obama may last months, not weeks.

Gingrich's come-from-behind triumph in the primary in the conservative southern state injects unexpected volatility into a Republican nominating race that until this week appeared to be a coronation for Romney, the former Massachusetts governor and private-equity chief.

Instead, voters in South Carolina rejected Romney's pitch that he is the best bet to fix a broken U.S. economy and defeat Obama, a Democrat, in the November 6 election.

Three different candidates - Gingrich, Romney and former U.S. senator Rick Santorum - now have won the first three contests in the state-by-state battle for the Republican presidential nomination to face Obama.

Gingrich's triumph may lead to a protracted battle of attrition as Republican candidates spend millions of dollars to tear each other down rather than uniting behind a standard-bearer to take back the White House.

With nearly all the votes counted, Gingrich had pulled in 40 percent of the vote, followed by Romney with 28 percent, networks reported. Santorum was in third with 17 percent and U.S. congressman Ron Paul in fourth with 13 percent.

The next contest is the Florida primary on January 31.

Riding a series of feisty debate performances, the former speaker of the House of Representatives captured the lingering unease of conservative voters in South Carolina who view Romney's moderate past and shifting policy stances with suspicion. Gingrich argued that he would be able to better articulate the party's conservative ideals.

South Carolina was a stunning turnaround for Gingrich, whose campaign barely survived after top staff quit last June and stumbled to a disappointing finish just three weeks ago in Iowa, the first Republican nominating contest. He finished fourth in both Iowa and New Hampshire a week later as conservatives split their votes among several candidates.

Gingrich contrasted his sometimes-chaotic management style with Romney's buttoned-down approach, arguing that his campaign was powered by ideas rather than logistics. Romney is one of the wealthiest candidates ever to run for president and his campaign is well financed.

"We don't have the kind of money that at least one of the candidates have. But we do have ideas and we do have people," Gingrich told supporters in a 22-minute tirade against Obama, the news media, judges and other "elites."

Romney acknowledged that there will be a long primary season. He said he would continue to run on his business record and paint Gingrich as a creature of Washington in the weeks ahead.

"I don't shrink from competition, I embrace it," Romney told supporters. "I believe competition makes us all better. I know it's making our campaign stronger."

Obama, who does not face a primary challenger, will have his turn in the spotlight on Tuesday with his State of the Union address. In a message to supporters on Saturday, he said the speech would focus on "building an economy that works for everybody, not just a wealthy few."

ON TO FLORIDA

Heading into Florida, Romney starts off with a wide lead in the polls and a distinct edge in logistics and fund-raising, which will be crucial in a state with 10 separate media markets.

Campaigns must spend at least $1 million each week to reach voters in the sprawling southern state, according to local political officials. Romney's allies have already spent $5 million, mostly on ads attacking Gingrich. No other candidate has a significant presence in the state.

Animosity between Gingrich and Romney has been festering since December, when a group supporting Romney launched a blitz of negative TV ads in Iowa that ruined Gingrich's campaign there. In South Carolina, a state with a reputation for rough and tumble politics, the gloves came off.

Gingrich attacked Romney's business record at private equity firm Bain Capital and his reluctance to release personal tax information, while Romney pointed to Gingrich's past ethics lapses and alluded to his messy personal life.

South Carolina Republican voters said they were focused on fixing the sluggish economy and finding the strongest candidate to defeat Obama. Some 78 percent said they were "very worried" about the economy and 45 percent said that the most important trait in a candidate was the ability to beat Obama, according to exit polls released by CNN.

Those issues are the twin pillars of Romney's candidacy.

But Gingrich's wide-ranging stump speeches and red-meat attacks against Obama convinced many voters that he had the fire in the belly to take on the incumbent.

"A vote for Newt was a vote against Obama," said Charleston photographer Kim Woods, who voted for Gingrich.

Romney saw his aura of inevitability erode in South Carolina after leading opinion polls by 10 percentage points a week ago. He suffered a setback on Thursday when Iowa officials declared in a recount that he had actually come in second place in that state, instead of winning narrowly as initially announced.

Romney took a swipe at Gingrich for criticizing his conduct at Bain Capital, calling it an "assault on free enterprise."

"Those who pick up the weapons of the left today will find them turned against us tomorrow," Romney told supporters.

Voters said they viewed Romney's business background as an asset. But he waffled this week when asked whether he would release his tax records, and acknowledged that he pays a much lower tax rate than many Americans, around 15 percent.

In his speech, Gingrich took aim at Obama, painting him as a weak president, "truly a danger to the country" with his energy policies and "out of touch with reality." He also lashed the news media and condemned what he called "the growing anti-religious bigotry of the elites" in America.

'PUNCH IN THE MOUTH'

"This is the punch in the mouth/wake up call Romney needed if he wanted to be a strong general election candidate," Republican strategist Ford O'Connell said in a Twitter message, referring to the South Carolina results.

Romney has attacked Gingrich's ties to mortgage giant Freddie Mac and criticized his time in the nation's capital. His campaign also highlighted Gingrich's $300,000 fine due to ethics lapses while serving as House speaker 15 years ago.

The thrice-married Gingrich has fended off publicity about his turbulent marital history. On Thursday, he rejected his second wife's accusation that he had asked her for an "open marriage" while he was having an affair with another woman in the 1990s.

South Carolina has been a tough state for Romney's presidential ambitions. In his previous run for the White House in 2008, Romney finished a poor fourth, with just 15 percent of the vote, behind winner and eventual Republican nominee John McCain. McCain endorsed Romney in the current campaign.

The winner of South Carolina's Republican presidential primary has gone on to win the party's nomination in every presidential election since 1980.

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Romney says he is taxed at around 15 percent rate

 Republican Mitt Romney

(Reuters) - Republican Mitt Romney acknowledged Tuesday that his income tax rate is "probably closer to 15 percent than anything," suggesting that one of the wealthiest people to ever run for U.S. president pays a much lower rate than most Americans.

His comment, a day after Romney agreed for the first time to release his tax returns -- but not until April when they are generally filed -- added fuel to his Republican rivals' calls for him to be more transparent about his finances.

It also drew fire from the Democratic White House and other critics, who said it reflected how Romney, whose estimated net worth is $270 million, is out of touch with the experiences and concerns of typical Americans.

Romney, a former private equity executive and Massachusetts governor, seemed to feed that narrative on Tuesday. He said that he gets speaker fees "from time to time, but not very much."

Annual campaign financial disclosure forms indicate that he was paid more than $374,000 in speaker fees from February 2010 to February 2011.

Romney's estimate of his income tax rate suggested that like many of the wealthiest Americans, he could earn a large chunk of his income from investments - much of it in capital gains.

Because capital gains generally are taxed at 15 percent compared with the top income tax rate of 35 percent on ordinary wages, those with significant income from capital gains often pay lower tax rates than many Americans.

Such disparity in the rates within the U.S. tax code are a sore point for many Americans, even some of the very rich whose rates are relatively low.

Billionaire investor Warren Buffett, for example, has said he paid $6.9 million in federal income taxes on $39.8 million in taxable income in 2010, a rate of 17.4 percent. Buffett has said it's unfair than his tax rate is lower than his secretary's.

Romney is the prohibitive favorite to win the Republican nomination and the right to face Democratic President Barack Obama in the November 6 elections.

On Tuesday, the White House moved quickly to portray Romney as an elitist, which almost certainly will be a theme of Obama's campaign this fall.

"Everybody who's working hard ought to pay their fair share" of taxes, the White House said in a statement. "That includes millionaires who might be paying an effective tax rate of 15 percent when folks making $50,000 or $75,000 or $100,000 a year are paying much more."

ROMNEY UNDER PRESSURE

Romney has long been reluctant to raise a curtain on his vast financial holdings.

In recent days, Romney's increasingly desperate rivals - former House of Representatives Speaker Newt Gingrich and Texas Governor Rick Perry - repeatedly have questioned whether Romney, in not releasing his tax returns, is hiding something.

Their calls for Romney to release his returns were echoed on Tuesday in a New York Times editorial, which called Romney's "insistence on secrecy impossible to defend now that he appears to be closing in on the nomination and questions have intensified about his personal finances."

During Monday night's Republican presidential debate in Myrtle Beach, Romney said, "I have nothing in (the returns) that suggests there's any problem and I'm happy to" release them around the federal tax filing deadline in mid-April.

"I sort of feel like we are showing a lot of exposure at this point," Romney added. "And if I become our nominee, and what's happened (with past presidential candidates) is people have released them in about April of the coming year, and that's probably what I would do."

FORTUNE INVESTED IN BAIN FUNDS

Tax analysts say Romney may have good reason to be reluctant to release his returns.

His vast fortune is invested in dozens of funds linked to Bain Capital LLC, the powerhouse private equity firm he co-founded and led for 15 years. Several Bain funds have offshore connections and take advantage of tax breaks used only by the U.S. financial elite.

His tax returns could shed light on how Romney and Bain use offshore strategies to avoid taxes, said Daniel Berman, a former U.S. Treasury deputy international tax counsel and now director of tax at Boston University's graduate tax program.

Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.

"Certain interests in foreign investment structures would have to be reported on attachments to his return," Berman said.

On capital gains, Romney's tax returns would not reveal any gains that he has not yet realized, even though those gains would be easy for him to lock in at any time, Berman said.

"I remember as a young lawyer being surprised to see tax returns of very successful investors showing net losses - because they were recognizing net losses" but not yet factoring in unrealized gains, Berman said.

Romney's returns also might not spell out how much he benefits from a tax break used by private equity executives called the carried interest loophole.

This rule allows private equity and hedge fund managers to pay the 15 percent capital gains tax rate, rather than the top income tax rate, on a large portion of their earnings.

A SERIES OF ATTACKS

The demands by Gingrich and Perry are their latest attempt to draw attention to Romney's wealth.

They also echo Gingrich and Perry's criticism of Romney's time at Bain, which he left in 1999. Bain was involved in overhauling dozens of companies, and in some cases laid off thousands of workers.

Gingrich, Perry and others have portrayed Romney as a job killer and, as Perry put it, a "vulture" capitalist. The attacks don't seem to have worked, for Romney is still leading in most public opinion polls.

Gingrich continued to pound on the tax return theme Tuesday.

"It's interesting that Romney agreed that he ought to release his income taxes but he doesn't want to do it until April," by which time Romney could have clinched the Republican nomination, Gingrich said during an interview with CBS.

"I think the people of South Carolina ought to know now -- if there's nothing there, why hide it until April? And if there's something there, don't the people of South Carolina deserve to know before Saturday?"

Gingrich added that he would release his tax returns this week. As Texas governor, Perry has released his each year.

Gingrich and Perry are battling former Pennsylvania U.S. senator Rick Santorum to put together enough conservative votes to block Romney's march to the nomination.

Romney won the Iowa caucuses and New Hampshire primary this month - the first two nomination contests - and is favored to win the South Carolina primary Saturday as well as Florida's primary on January 31.

Santorum, thought earlier this month to be Romney's main challenger, has not been as vocal in calls for Romney to release his tax returns.

A Santorum aide said that he was unsure whether Santorum would press Romney on the matter, but said, "We've been a pretty staunch advocate of airing out all the laundry now."

"We don't need any surprises," the aide said. "We need to know now."

The Romney campaign dismissed the latest calls to release his tax returns as a sign of desperation.

"This is pasta politics," Eric Fehrnstrom, a senior Romney adviser, said. Gingrich is "throwing spaghetti against the wall to see what sticks."

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Romney leads in first four nominating states: poll

Romney

(Reuters) - Former Massachusetts Governor Mitt Romney leads his campaign rivals in the four states that kick off the 2012 Republican presidential race, according to CNN/Time/ORC polls released on Wednesday.

Barely more than two months before the first nominating contest, Romney has narrow leads in Iowa and South Carolina and double-digit advantages in New Hampshire and Florida.

Conservative businessman Herman Cain, who surged into the lead in some recent national polls but has faced heightened scrutiny in the past week, is in second place in each state.

A Romney sweep of the first four states to cast votes in the nominating race would put an early end to the battle to find a challenger to President Barack Obama in 2012.

But the polls also found there was plenty of room for more changes in the frequently shifting Republican race. Majorities in Iowa and South Carolina said they might change their minds about their votes, and about half in Florida and New Hampshire said the same.

The polls found Romney with a slight edge in Iowa of 3 percentage points, 24 percent to 21 percent, over Cain. His lead was even smaller, 25 percent to 23 percent, in South Carolina. Both leads were within the polls' margin of error of 5 percentage points.

Iowa and South Carolina have big blocs of conservative voters distrustful of Romney, who as governor of liberal Massachusetts supported abortion rights and a healthcare overhaul that was a precursor of Obama's federal law.

Romney has a big 27-point lead over Cain in New Hampshire, which borders Massachusetts and where Romney has a vacation home. He also has a comfortable 12-point lead, 30 percent to 18 percent, over Cain in Florida.

The polls were taken Thursday through Tuesday, following the most recent Republican debate last week.

Libertarian U.S. Representative Ron Paul was in third place in Iowa, South Carolina and New Hampshire. In Florida, former Speaker of the U.S. House of Representatives Newt Gingrich and Texas Governor Rick Perry were tied for third place.

Iowa kicks off the nominating race on January 3, followed by New Hampshire, which is expected to hold its primary on January 10, South Carolina on January 21 and Florida on January 31.

Romney's support was relatively broad across various political and demographic groups. He led easily among self-styled moderate or liberal Republicans, but also led among Tea Party fiscal conservatives in New Hampshire. He tied Cain among that group in Florida and was second behind Cain with Tea Party voters in Iowa and South Carolina.