By: E, J. Dionne, Jr., Opinion Writer, The Washington Post, September 30, 2012
“No, We Don’t Dig It”: What We Still Don’t Know About Mitt Romney’s Taxes
With the documents Mitt Romney released recently, we know a bit more about his taxes.
We know, for instance, that Romney paid a rate of 14.1 percent on $13.7 million in income on his 2011 tax return, which he achieved by purposely overpaying. Though he was entitled to deduct $4 million in charitable contributions, Romney deducted only $2.25 million to keep his tax rate above 13 percent.
(Romney, it has been pointed out, could file an amended return to claim the full deduction after the election. We’ve contacted the Romney campaign, and Michele Davis, a spokeswoman, assured us he would not do so.)
We know, according to a letter from his accountants at PricewaterhouseCoopers, that Romney has paid state and federal income taxes each year since at least 1990, which would seem to disprove Senate Majority Leader Harry Reid’s claim in July that Romney had not paid any taxes for a decade.
And we know that Romney’s tax rate since 1990 never dipped below 13.66 percent, according to his accountants. Romney paid an average effective tax rate between 1990 and 2009 of 20.2 percent.
But there’s still a lot we don’t know. “I think most of the major questions we had before [last Friday] are still out there,” said Brian Galle, a tax law professor at Boston College. Here are a few:
How much did Romney make before 2010?
While Romney has disclosed his average effective tax rate for the last two decades, he hasn’t said how much he earned in those years or how much — the dollar amount — he paid in taxes.
That’s an important distinction, said Daniel Shaviro, a tax law professor at New York University. Various tax-planning strategies may have enabled Romney to reduce his adjusted gross income in some years.
In 2008, for instance, investors everywhere lost money when the stock market tanked. Romney may have carried those losses forward, Shaviro said, and used them to reduce his adjusted gross income in 2009. While we know Romney paid at least 13.66 percent of the income he recorded on his taxes in a given year, we don’t know what percentage he paid of the money actually took home that year.
Why is Romney’s IRA worth so much?
Much of Romney’s wealth sits in his IRA, which is worth as much as $101.6 million. It’s a remarkable number, in part because Romney would have been able to contribute a maximum of $30,000 a year to his IRA while he was at Bain, from 1984 to 1999.
Galle, the Boston College tax law professor, said the most likely explanation for the outsized IRA is that Romney put in shares in Bain investments that swelled in value. According to the Wall Street Journal, Bain allowed employees to buy a special class of shares in the firm’s investments. The shares didn’t cost very much, but they could be extremely lucrative. In one deal, the Journal reported, “some Bain employees saw a 583-fold increase” in the value of their shares — an astronomical return. Because the shares were in IRAs, the profits could be plowed into new Bain deals without subtracting taxes.
Romney also may have beefed up his IRA by contributing “carried interest” — a share of the profits in funds managed by Bain. As Reuters reported earlier this year, any potential carried interest would “not be disclosed in his personal financial summary or on a federal income tax return.” In other words, even if Romney released all his tax returns, we still might not know exactly how he accumulated his huge IRA.
What about Romney’s investments offshore?
We know many of Romney’s IRA investments are based in foreign countries but it’s hard to know how much. He valued one account in the Cayman Islands at anywhere between $5 million and $25 million.
One thing we do know is that Romney pays a far lower tax rate overseas than he does here. According to Quartz, Romney paid only 2.4 percent in foreign taxes in 2011 on the $3.5 million he earned abroad.
We also know where Romney’s current overseas investments are held —Bermuda, the Cayman Islands, Switzerland, Luxembourg — and many of the firms he has invested in, including a state-owned Chinese oil company and a Chinese bank that Romney’s family trusts sold their stake in last year. But we don’t have a lot of other important documentation, including forms would show whether Romney had, as the New York Times has reported, “over the years declared all of his foreign income to the IRS in a timely manner.”
The Wall Street Journal has reported that Romney’s offshore IRA investments likely helped him avoid a little-known tax called the unrelated business income tax. The tax, “meant to discourage tax-exempt entities such as an IRA or college endowment fund from unfairly competing with for-profit, taxpaying entities by operating a business without paying taxes on it,” could have hit Romney at up to 35 percent.
The Romney campaign seems unlikely to release any more information about his finances, but that hasn’t kept reporters from digging it up. Bloomberg, for instance, analyzed securities filings to report last Thursday that Romney has set up a type of trust known as an “I Dig It” trust — a legal way for Romney to avoid estate and gift taxes and pass some of his fortune onto future generations.
By: Theodoric Meyer, Propublica, October 1, 2012
“Vagueness In, Vagueness Out”: Foreign Policy Is Hard For Mitt Romney
In today’s Wall Street Journal, Mitt Romney takes to the op-ed page to offer his vision for a new American policy in the Middle East. Apparently, the tragic recent events in Benghazi have convinced Romney and his advisors that something is going on over there, and though they aren’t sure exactly what, it’s definitely something, and therefore Romney ought to come and say something about it, to show everyone how wrong Barack Obama is. If you thought Romney was being vague about his domestic policy, that’s nothing compared to what he has to say about foreign policy.
The first half of the piece is the standard criticism of the Obama administration (he’s weak!), and here’s the part where Romney lays out in specific detail exactly what he’d do differently:
In this period of uncertainty, we need to apply a coherent strategy of supporting our partners in the Middle East—that is, both governments and individuals who share our values. This means restoring our credibility with Iran. When we say an Iranian nuclear-weapons capability—and the regional instability that comes with it—is unacceptable, the ayatollahs must be made to believe us.
It means placing no daylight between the United States and Israel. And it means using the full spectrum of our soft power to encourage liberty and opportunity for those who have for too long known only corruption and oppression. The dignity of work and the ability to steer the course of their lives are the best alternatives to extremism.
But this Middle East policy will be undermined unless we restore the three sinews of our influence: our economic strength, our military strength and the strength of our values. That will require a very different set of policies from those President Obama is pursuing.
The 20th century became an American Century because we were steadfast in defense of freedom. We made the painful sacrifices necessary to defeat totalitarianism in all of its guises. To defend ourselves and our allies, we paid the price in treasure and in soldiers who never came home. Our challenges are different now, but if the 21st century is to be another American Century, we need leaders who understand that keeping the peace requires American strength in all of its dimensions.
OK, so what do we have here? America needs to support our partners. We need to restore our credibility with Iran, by making them believe that we really, really don’t want them to have nuclear weapons. We need to place no daylight between ourselves and Israel. And we need to encourage liberty and opportunity. That line about “the dignity of work” is a little odd—maybe the problem they have in the Middle East is too many 47 percenters? So where’s the new policy again?
But in the next paragraph, he says he’s going to give us “a very different set of policies.” So here it comes, right? The answer is … “American strength in all its dimensions.” Ah yes. Strength. Resolve. If you ask “How, precisely, will you achieve these goals?” then you’re obviously a weakling who can’t grasp the full majesty of Mitt Romney’s chin, which when jutted in the direction of our adversaries will make them quake before us and submit to our demands.
I can muster a little bit of sympathy for Romney here. Middle East politics is hard! A permanent settlement between the Israelis and the Palestinians seems all but impossible, particularly given that the policy of the Israeli government essentially comes down to “the beatings will continue until morale improves.” The question of Iran’s nuclear aspirations offers nothing but bad alternatives. Romney keeps saying he wants America to “shape events” in the Middle East, but as president after president has discovered, that’s a tall order. You can certainly shape events by invading somebody, but that tends to come with some problematic repercussions.
But the real reason Romney seems incapable of offering any specific policies he wants to change is that he can’t quite figure out which Obama policies he objects to. His criticism is that Obama is “weak,” so the alternative he offers is that he’ll be “strong.” Vagueness in, vagueness out.
By: Paul Waldman, Contributing Editor, The American Prospect, October 1, 2012
“The Real Referendum”: The Legacy Of The New Deal, The Great Society And Obamacare
Republicans came into this campaign believing that it would be a referendum on President Obama, and that still-high unemployment would hand them victory on a silver platter. But given the usual caveats — a month can be a long time in politics, it’s not over until the votes are actually counted, and so on — it doesn’t seem to be turning out that way.
Yet there is a sense in which the election is indeed a referendum, but of a different kind. Voters are, in effect, being asked to deliver a verdict on the legacy of the New Deal and the Great Society, on Social Security, Medicare and, yes, Obamacare, which represents an extension of that legacy. Will they vote for politicians who want to replace Medicare with Vouchercare, who denounce Social Security as “collectivist” (as Paul Ryan once did), who dismiss those who turn to social insurance programs as people unwilling to take responsibility for their lives?
If the polls are any indication, the result of that referendum will be a clear reassertion of support for the safety net, and a clear rejection of politicians who want to return us to the Gilded Age. But here’s the question: Will that election result be honored?
I ask that question because we already know what Mr. Obama will face if re-elected: a clamor from Beltway insiders demanding that he immediately return to his failed political strategy of 2011, in which he made a Grand Bargain over the budget deficit his overriding priority. Now is the time, he’ll be told, to fix America’s entitlement problem once and for all. There will be calls — as there were at the time of the Democratic National Convention — for him to officially endorse Simpson-Bowles, the budget proposal issued by the co-chairmen of his deficit commission (although never accepted by the commission as a whole).
And Mr. Obama should just say no, for three reasons.
First, despite years of dire warnings from people like, well, Alan Simpson and Erskine Bowles, we are not facing any kind of fiscal crisis. Indeed, U.S. borrowing costs are at historic lows, with investors actually willing to pay the government for the privilege of owning inflation-protected bonds. So reducing the budget deficit just isn’t the top priority for America at the moment; creating jobs is. For now, the administration’s political capital should be devoted to passing something like last year’s American Jobs Act and providing effective mortgage debt relief.
Second, contrary to Beltway conventional wisdom, America does not have an “entitlements problem.” Mainly, it has a health cost problem, private as well as public, which must be addressed (and which the Affordable Care Act at least starts to address). It’s true that there’s also, even aside from health care, a gap between the services we’re promising and the taxes we’re collecting — but to call that gap an “entitlements” issue is already to accept the very right-wing frame that voters appear to be in the process of rejecting.
Finally, despite the bizarre reverence it inspires in Beltway insiders — the same people, by the way, who assured us that Paul Ryan was a brave truth-teller — the fact is that Simpson-Bowles is a really bad plan, one that would undermine some key pieces of our safety net. And if a re-elected president were to endorse it, he would be betraying the trust of the voters who returned him to office.
Consider, in particular, the proposal to raise the Social Security retirement age, supposedly to reflect rising life expectancy. This is an idea Washington loves — but it’s also totally at odds with the reality of an America in which rising inequality is reflected not just in the quality of life but in its duration. For while average life expectancy has indeed risen, that increase is confined to the relatively well-off and well-educated — the very people who need Social Security least. Meanwhile, life expectancy is actually falling for a substantial part of the nation.
Now, there’s no mystery about why Simpson-Bowles looks the way it does. It was put together in a political environment in which progressives, and even supporters of the safety net as we know it, were very much on the defensive — an environment in which conservatives were presumed to be in the ascendant, and in which bipartisanship was effectively defined as the effort to broker deals between the center-right and the hard right.
Barring an upset, however, that environment will come to an end on Nov. 6. This election is, as I said, shaping up as a referendum on our social insurance system, and it looks as if Mr. Obama will emerge with a clear mandate for preserving and extending that system. It would be a terrible mistake, both politically and for the nation’s future, for him to let himself be talked into snatching defeat from the jaws of victory.
By: Paul Krugman, Op-Ed Columnist, The New York Times, October 1, 2012
Giving Specifics Would “Take Me Too Long”: Paul Ryan Is Not In The Mood For Truth Telling
On Fox News Sunday, Rep. Paul Ryan claimed that Americans don’t know enough about what a Romney-Ryan presidency would do, which explains the campaign’s current troubles. But when Chris Wallace pressed Ryan to discuss the specifics of the Romney-Ryan tax plan, the mathematics of which have confounded non-partisan experts, he refused even to say how much the tax cuts the ticket has proposed would cost.
Everyone expects Mitt Romney to bob and weave around basic questions he doesn’t want to answer. But Ryan makes such a show about telling hard truths. Turns out Ryan’s self-righteousness has mainly served to make it more insulting when he bobs and weaves himself.
“It would take me too long to go through all of the math,” Ryan explained Sunday morning. But Wallace wasn’t asking for “all” of the math, just basic numbers. As usual with the GOP ticket, the only specific figure Ryan wanted to discuss was how much he and Romney want to drop tax rates. Wallace repeatedly asked Ryan whether Romney’s proposed tax cuts would cost $5 trillion, a question meant to establish one side of the budget equation before moving to a discussion of how Romney would pay for the cuts. But Ryan repeatedly refused to go through the addition and subtraction, instead insisting that the numbers eventually come out in his favor — Romney’s proposed tax cuts would cost nothing, he said, because Romney would offset them by cutting loopholes, primarily for upper incomes.
But which loopholes, and where does Romney draw the line between middle- and upper-income Americans? Ryan had nothing too specific there, either. The best he could do was repeat the nice-sounding logic of the Romney-Ryan plan:
You can lower tax rates 20 percent across the board by closing loopholes and still have preferences for the middle class for things like charitable deductions, home purchases, for health care. What we’re saying is people are going to get lower tax rates and therefore they will not send as much money to Washington.
Wallace went on to ask Ryan what Romney’s highest priority would be if the GOP ticket’s tax plan didn’t turn out to be revenue-neutral. Ryan answered that “keeping tax rates down” is “more important than anything.” Since Ryan kept insisting that he and Romney need not make a choice between tax cuts and, say, controlling the deficit, he probably didn’t mean for his statement to sound ominous. But since he merely said — and did not show — that Romney’s math could add up, ominous his statement was.
Wallace should have followed up with a question about how, even if Romney and Ryan managed to cut taxes and kept federal revenue where it is, they could then plausibly fix America’s long-term budget mess without additional money. Then again, Ryan didn’t seem to be in the mood for any hard truth-telling.
By: Steven Stromberg, The Washington Post, September 30, 2012
“A Strategic Conundrum”: Defining The Presidential Debate Game
In this week’s debate, Mitt Romney has too much to do. President Obama has a great deal to lose. Romney’s is the most difficult position. Obama’s is the most dangerous.
Romney needs to use the Denver encounter to reverse the slide he has found himself in since the party conventions. While Republican partisans claim that many of the public polls survey too many Democrats and are thus casting Romney as further behind than he is, the behavior of the Romney campaign suggests it does not believe this. Many of its recent strategic moves have smacked of damage control and appear to reflect an understanding that if the campaign stays on its current trajectory, Obama will prevail.
The most dramatic evidence was the decision to air a 60-second spot touting Romney’s compassion, clearly an effort to counter the disastrous impact of the leaked video showing the Republican nominee writing off 47 percent of the electorate. The former Massachusetts governor’s private words only reinforced months of advertising by Obama and allied groups portraying Romney as a wealthy, out-of-touch champion of the interests of the very rich. Recent polling in swing states has shown that this attack has stuck.
Most striking of all, a campaign that has been relentless in assailing Obama abandoned this approach for a moment in the compassion ad by having Romney declare that “President Obama and I both care about poor and middle-class families.” Challengers are always in a weak position when they have to hug their opponent for validation. This is a defensive move, a sign of how worried Romney is about Obama’s lead in the surveys as a friend of the middle class and the needy.
That’s why the debate is a strategic conundrum for Romney. On the one hand, he has to use it to change his image, particularly among women and the blue-collar white voters he needs to counter Obama’s overwhelming margins among African-Americans and Latinos. This sort of repair work takes debate time and energy away from Romney’s primary task, which is to put Obama on his heels about his record.
Romney will have to pull off this two-step at a moment when his campaign has been forced into a course correction. The polls suggest Romney is losing what he once thought were his biggest assets against Obama: Swing-state voters, albeit narrowly, now favor Obama as a future steward of the economy and are in a somewhat better mood about its condition. With Romney not certain he can count on the economy as the issue to power him through the campaign’s final weeks, he is scrambling to find other themes. This very process undermines the focus of his efforts and gives his argument a scattershot feel.
Paradoxically, Obama’s advantages over Romney create the president’s biggest debate challenge. He does not want to take great risks because he doesn’t have to. Above all, he wants to avoid a major blunder that would dominate the post-debate news and replace Romney’s problems and mistakes as the principal elements in the media’s narrative.
Yet concentrating too much on avoiding mistakes could itself prove perilous. An excessively cautious performance could give Romney an opening to take over the debate and make the president look reactive. If Romney showed one thing in the primaries, it is that he can be ferocious when faced with the need to dispatch an opponent. Recall the pummeling Romney gave Newt Gingrich in a Jan. 26 debate before the Florida primary.
And while guarding against any hint of passivity, Obama will have to avoid intimations of arrogance or overconfidence. Al Gore marred an otherwise strong night with his rather dismissive sighs during a 2000 debate with George W. Bush. If a comparable moment from Obama is what Romney will hope for from the debate, Obama’s aspiration is for a showdown in which he calmly, perhaps even amiably, maintains focus on the subjects that have consistently given Romney such trouble. Every mention of the number 47 will be a victory for Obama.
One of the shortcomings of the contemporary media environment is that while debates are supposed to be occasions when candidates thrash out matters of consequence thoughtfully and in detail, the outcomes are often judged by snippets that are more about personal character than issues or problems. Journalists, to invoke the most promiscuously deployed phrases, are forever in search of “defining moments” and “game-changers.”
By this standard, Romney very much needs that game-changer. Obama can live quite happily without one.
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