Three Key Questions Raised By Romney’s Tax Revelations
Mitt Romney’s campaign has tried desperately to put a lid back on the can of worms that burst open weeks ago when the one-time GOP presidential front runner declined to release any of his tax returns.
But by actually releasing his 2010 return, and an estimation of his 2011 return, camp Romney has provided reporters with some, but not all, of the answers they’re looking for as they try to paint a complete picture of the finances of one of the wealthiest candidates for President in U.S. history.
Romney’s revelations confirm that his effective tax rates in the past couple years have been as low or lower than those of workers with truly modest means. They also confirm that he’s availed himself of truly complex tax strategies designed to boil his liability down to the lowest level allowed by the country’s heavily rigged, labyrinthine tax code. And we know, too, that these are things Romney didn’t want voters to know — at least not yet.
But they raise a series of new questions that will likely require Romney to disclose several years’ worth of additional tax returns if he wants to answer them satisfactorily. Here are three big ones that touch generally on the theme of Romney’s efforts to reduce his tax burden by taking advantage of areas of the law that simply aren’t available to most people.
How Low Do They REALLY Go
Romney’s effective tax rate was 13.9 percent of his adjusted gross income (AGI) in 2010, and is expected to be slightly higher in 2011. Set aside for now the fact that for a high net worth individual like Romney, AGI often understates what you might call “true” income — meaning these effective tax rates probably overstate Romney’s 2010 and 2011 tax liability. It turns out that in 2009, in the wake of the financial crisis, Romney very likely managed to get his effective tax rate much lower than 13.9 percent. In 2010, Romney carried over $4.9 million in capital losses from 2009. This is a consequence of the tax code’s leniency toward investors who take hits in bad years. But as tax lawyer Ed Kleinbard told reporters during a Tuesday conference call organized by the DNC, “that means he paid no tax on any of his capital gains in 2009, including tax on his carried interest in 2009.” That’s not necessarily because Romney actually lost money in 2009, either. As Kleinbard explained, a common tactic for Americans with capital gains is to “harvest” — by selling off certain investments that lose value investors can count the losses against gains elsewhere in their portfolios. If those losses exceed the gains by more than a certain amount, they roll over into the following tax cycle. Unless Romney had significant sources of non-investment income, that suggests his effective tax rate in 2009 was much lower than 13.9 percent. And remember, he jokes he’s been unemployed for years.
That UBIT Bit
One of camp Romney’s chief claims has been that his offshore investments haven’t been covers for deferring or avoiding U.S. taxation. But as described, here, there is one tax strategy that could have allowed Romney to avoid a big, 35 percent tax on unrelated business income, as it pertains to his massive individual retirement account — if that account is invested in an offshore entity. When asked Tuesday if Romney has ever benefited from this strategy, his trust adviser Brad Malt said, “I don’t know the answer to that — let us get back to you on that.” We haven’t received an answer yet, but we’ll pass it along when we get it.
Swiss Amiss?
Romney’s 2010 tax return reveals a Swiss bank account. “It is listed because I set that account up for diversification in 2003 when I became trustee of the blind trusts,” Malt said. “It is a bank account. Nothing more, nothing less. An ordinary bank account. It earns some income which is fully reported on the form 1040. In the 2010 tax return, you’ll see approximately $1,700 in interest earned by this account, which is reported. The tax is fully paid just as if this were a U.S. bank account. Nothing more complicated than that. By the way, I did close this account in early 2010. It no longer exists.”
Some reports suggest that the account was closed for political reasons, but Malt said “I regularly review Governor Romney’s investments just in connection with my periodic reviews, I decided that this account wasn’t serving any particular purpose….Again, taxes were all fully paid etc. But it just wasn’t worth it. And I closed the account.” Tax experts have noted to TPM in recent days that U.S. law changed shortly before then, to make it harder for U.S. persons to avail themselves of tax havens. Shortly thereafter the IRS gave people secreting their money abroad a time window for compliance. Taking camp Romney at its word, that wasn’t really their concern. Even if the account existed for purposes of diversification that could be politically embarrassing in and of itself, constituting a bet against U.S. currency. But to fully answer the question, we’d need to know if that bank account is declared in the years before the law changed. Camp Romney did not respond to a request for comment on this point Tuesday.
By: Brian Beutler, Talking Points Memo, January 25, 2012
“BFF’s”: Mitt Romney And Freddie Mac
To get an edge in advance of Florida’s Republican presidential primary, Mitt Romney has gone after Newt Gingrich this week on his ties to Freddie Mac. At first blush, it’s not a bad move; Gingrich is clearly vulnerable on the subject.
But Romney may not have thought the attacks all the way through.
According to his personal finance disclosure forms, Romney invested pretty heavily in Freddie Mac and made a fair amount of money doing so.
Asked about this on Fox News this morning, Romney was reduced to lying.
BRIAN KILMEADE: Yesterday Newt Gingrich joined us and said, “I just found out that Mitt Romney was in investor in Fannie & Freddie.” What’s the truth?
MITT ROMNEY: [Laughs] That’s pretty funny. My investments, of course, are managed not by me. For the last 10 years they’ve been guided and managed by a trustee, they’re in a blind trust. And the trustee invested in mutual funds and so forth and apparently one of the funds had Fannie Mae or Freddie Mac bonds.
We already know that’s not true. The Boston Globe reported on some of Romney’s finances a few months ago, and specifically noted, “[U]nlike most of Romney’s financial holdings, which are held in a blind trust that is overseen by a trustee and not known to Romney, this particular investment was among those that would have been known to Romney.”
The “blind trust” line isn’t going to cut it.
For that matter, Romney is slamming Gingrich for lobbying on behalf of Freddie Mac, but at the same time, a top Romney campaign surrogate and advisor is also — you guessed it — a former lobbyist for Freddie Mac.
Romney’s campaign really ought to be paying closer attention to these details.
By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, January 25, 2012
Why Swing State Republican Governors Will Get President Obama Re-Elected
The other shoe in the saga of Wisconsin Gov. Scott Walker’s union-busting crusade dropped last week, and it landed with a ton-and-a-half thud. That’s the literal weight of the more than 1 million signatures in favor of Walker’s recall that progressive activists gathered over a 60-day window.
That’s more than 16,000 signatures collected per day. It’s nearly as many people as voted for Walker in his 2010 election (1.1 million) and roughly the same number that voted for his opponent. Roughly one in every three registered Wisconsin voters signed up. And since the threshold for a recall election is 540,000 signatures, it virtually guarantees Walker will face the voters this year.
But its significance extends beyond the fate of one right-wing zealot. Walker is the best known of a class of freshmen GOP governors whose conservative power grab might be Barack Obama’s not-so-secret re-election weapon.
Walker, you will recall, ran for governor with nary a word about breaking the backs of the state’s public unions and then made it a key part of his signature administration policy, an action he later compared to dropping “the bomb.” He sparked a backlash that initially took the form of mass protests, with tens of thousands of enraged Wisconsinites occupying the state capitol before “occupy” became a movement.
The 1 million signatures should send a chill up the back of Mitt Romney or Newt Gingrich or whoever the GOP taps to bear its standard. Wisconsin is a key swing state and the progressive movement just flexed some awfully strong organizational muscle there, sparked by Walker’s ham-fisted overreach. The recall election, likely to occur in the late spring or early summer, will serve as a perfect progressive dry run for the Obama re-election in the fall.
And Wisconsin is not an isolated example. The Cook Political Report lists 10 states, with 142 electoral votes, as toss-ups. In that group, with 73 total electoral votes, are four states, including Wisconsin, where first-term Republican governors are foundering in the polls after their excessive policies spurred the kind of grass-roots movements that can be a huge boon to a presidential campaign.
Take Walker’s neighboring colleague, Michigan Gov. Rick Snyder. With the help of a GOP-controlled legislature, Snyder enacted a law that allows him to appoint “emergency financial managers” in financially troubled cities and school districts. These appointed individuals would have the power to fire actual elected officials, void union contracts, terminate services, sell off assets—even eliminate whole cities or school districts. And these localized tyrants could take these actions without any public input.
It’s no wonder that Michigan State University’s “State of the State” poll, released in early December, found that only 19 percent of Wolverine State residents rate Snyder’s performance as excellent or good (down from 31.5 percent in the spring). Critics of the law have already collected nearly 200,000 signatures for a November referendum on the law.
Snyder’s neighbor to the south, Ohio Gov. John Kasich, whose approval rating languishes in the mid-30s, received his stinging rebuke from the public last November. By 62 to 38 percent, voters repealed his legislative centerpiece, a Wisconsin-like law that barred public sector strikes, curtailed collective bargaining rights for public workers, and terminated binding arbitration of management-labor disputes. Opponents collected more than 1 million signatures (there’s that number again) to get the issue on the ballot, and raised $30 million in support of repeal, outspending the law’s defenders 3 to 1. It was a stunning win for labor unions, with help from Obama’s Organizing for America, a mere year after the Ohio GOP had swept every statewide office and won the legislature. “Unions and their allies have done a lot of things transferable to next year,” the University of Akron’s John Green told the Cleveland Plain Dealer. “In some respects, the campaign was a trial run for the presidential.”
A bonus for the Obama campaign: When Mitt Romney made an October swing through Ohio, he unbelievably pleaded ignorance of the law, prompting speculation that he was trying to avoid endorsing it. So the next day, in Virginia, he announced his foursquare support for it, masterfully reinforcing his reputation as a political calculator even as he landed on the wrong side of the biggest issue in Ohio politics.
Rounding out the four horsemen of the GOP’s gubernatorial apocalypse is Florida Gov. Rick Scott, whom Democratic polling firm Public Policy Polling declared in December to be the nation’s most disliked governor when he scored a 26 percent approval rating. That was due in part to the $1.35 billion Scott and the GOP legislature cut from education last year, as well as his push to drug-test welfare recipients. Apparently able to read the polls, Scott now wants to put $1 billion back into education funding, offsetting the spending by cutting $1.8 billion from Medicaid.
While a recent Quinnipiac poll found that Scott’s approval rating has soared to 38 percent (with 50 percent still disapproving), the same survey showed voters against cutting Medicaid to pay for education by 67 to 24 percent. Perhaps most alarming for Scott and the GOP is that independents disapprove of the governor by an even wider margin than Democrats.
After South Carolina, the Republican presidential traveling circus will move on to Florida. Watch as Mitt Romney embraces his toxic GOP colleague and listen for the sound of cheers from Obama 2012 headquarters.
By: Robert Schlesinger, U. S. News and World Report, January 25, 2012
President Obama’s Best State Of The Union Speech
The State of the Union was upbeat and positive, and that’s saying a lot from me, a pessimist. Now I know those on the right will tell you everything that was wrong with the president’s speech; heck, former House Speaker Newt Gingrich and former Gov. Mitt Romney told America what they thought of the president’s speech before he even uttered a word!
Personally, I felt the president hit it out of the park—his best State of the Union speech and hopefully his fourth, not his last.
Starting out with thanking the U.S. military, he pointed out that for the first time in nine years we’re no longer in Iraq, and more importantly, that we’re safer and we’re more respected throughout the world. And of course, there was the huge applause when he mentioned that for the first time in over two decades, we’re no longer fearful of the wrath of Osama bin Laden.
I personally loved when the president referred to how our military operates, and how we as a nation and how the government should operate: focus on the mission at hand and do it working together. With the lowest approval rating of Congress ever and polls showing that Americans clearly want both sides of the aisle to work together to get things done, the president, I believe, was speaking to all Americans and to all of our frustrations with our government.
I also liked how the president painted a picture of what could be. He pointed out America’s values; except for one remark about the administration that preceded him, he didn’t blame former President Bush, which I found refreshing and necessary.
He was bold when he specifically stated that the banks were wrong and irresponsible in lending money to people who couldn’t afford to pay it back.
He gave facts about job loss: 4 million jobs lost before he entered office, millions more before his policies were implemented.
I found that the president was being humble when he spoke of the jobs that businesses created–not he, his administration, or Congress.
When the president spoke of American values, it didn’t have to do with church or religion; it had to do with our work ethic—from American manufacturing to GM regaining its title as the number one automaker in the world. Even the Republicans had to clap on that one.
And for a president who is constantly accused of wanting to tax America to death, he was talking about a lot of tax credits going around: tax credits for making products here in America, tax breaks for small business owners—rewarding those who keep and develop jobs here, and stopping the rewards going to companies that send their jobs overseas. (Sidenote: Eric Cantor looked angry about that–hmm…)
Then the president went on to other things America values, other things that make our nation great, and what could make us greater: education. He linked education with the ability to increase a person’s income in the future. And he made it personal when he spoke of every person in the chamber who has a teacher they liked, remembered, etc. I found myself nodding at that remark.
He reached out to Hispanics with the DREAM act, although never mentioning it by name. He touched the unions in speaking about manufacturing, teachers, and the auto industry. And he even gave a shout out to us ladies with the desire for us to earn equal pay for the jobs we do that men do. (Woo hoo!)
The bottom line is, although this speech is about governing, it is a campaign year. I felt the president reminded Americans of where we are, how far we’ve come, and where we could be headed with him at the helm. He spoke of the facts rather than the fiction Americans so often hear in the media. And if America were a ship, he showed us with his words that he is more than up to the task of being the ship’s captain for the next four years.
By: Leslie Marshall, U. S. News and World Report, January 25, 2012
What John Boehner Considers “Almost Un-American”
Over the weekend, House Speaker John Boehner (R-Ohio) described President Obama’s State of the Union address, which he had not heard, as “pathetic.” Today, Boehner pushed the rhetorical envelope a little further.
House Speaker John Boehner Tuesday forcefully denounced the Democrats’ campaign theme that they are for the middle class and Republicans are for the wealthy — saying the policies the president is running on are “almost un-American.”
“This is a president who said I’m not going to be a divider, I’m going to be a uniter, and running on the policies of division and envy is — to me it’s almost un-American,” said Boehner.
Even for Boehner, this kind of rhetoric is cheap and inappropriate.
At a certain level, it’s tempting to think the Speaker doesn’t even believe his own nonsense. What is it, exactly, that Boehner finds so offensive about President Obama’s message? The notion of a Democratic president championing the interests of the middle class isn’t exactly unusual, neither is the prospect of asking the very wealthy to pay a little more to help guarantee opportunities for all.
Indeed, there’s nothing in the White House’s agenda that wouldn’t have generated significant support from Democrats and moderate Republicans for the better part of the 20th century. Obama’s economic vision is, at a fundamental level, about as mainstream as you can get.
It makes sense for Boehner to attack this, to the extent that he sees it as his job to reflexively oppose everything the president is for. But officials, especially those in key positions of authority, really ought to avoid words like “un-American.” Just because the House elected an oft-confused Speaker, who lacks a cursory understanding of public policy and history, is no excuse for American leaders questioning other American leaders’ patriotism.
I’m reminded of a recent piece from Tim Dickinson:
The nation is still recovering from a crushing recession that sent unemployment hovering above nine percent for two straight years. The president, mindful of soaring deficits, is pushing bold action to shore up the nation’s balance sheet. Cloaking himself in the language of class warfare, he calls on a hostile Congress to end wasteful tax breaks for the rich. “We’re going to close the unproductive tax loopholes that allow some of the truly wealthy to avoid paying their fair share,” he thunders to a crowd in Georgia. Such tax loopholes, he adds, “sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10 percent of his salary — and that’s crazy.”
Preacherlike, the president draws the crowd into a call-and-response. “Do you think the millionaire ought to pay more in taxes than the bus driver,” he demands, “or less?”
The crowd, sounding every bit like the protesters from Occupy Wall Street, roars back: “MORE!”
The year was 1985. The president was Ronald Wilson Reagan.
Today’s Republican Party may revere Reagan as the patron saint of low taxation. But the party of Reagan — which understood that higher taxes on the rich are sometimes required to cure ruinous deficits — is dead and gone. Instead, the modern GOP has undergone a radical transformation, reorganizing itself around a grotesque proposition: that the wealthy should grow wealthier still, whatever the consequences for the rest of us.
I suppose the follow-up question for Boehner is, was Reagan “almost un-American,” too? Were the lawmakers from both parties who approved tax reform in the mid-80s a bunch of socialist sell-outs?
By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, January 24, 2012
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