“The Romneys Get Theirs”: How MItt Romney Used His Church’s Charity Status To Lower His Tax Bill
We already know that Mormon Mitt Romney has been tremendously generous to his church, giving over $5 million in the past two years alone, but now we learn that his charitable activity with LDS may not have been entirely altruistic. Bloomberg’s Jesse Drucker reports that Romney exploited the church’s tax-exempt status to lower his tax bill.
Romney reportedly took advantage of a loophole, called a charitable remainder unitrust or CRUT, which allows someone to park money or securities in a tax-deferred trust marked for his or her favorite charity, but which often doesn’t pay out much to the nonprofit. The donor pays taxes on the fixed yearly income from the trust, but the principal remains untaxed. Congress outlawed the practice in 1997, but Romney slid in under the wire when his trust, created in June 1996, was grandfathered in.
The trust essentially lets someone “rent” the charity’s tax-exemption while not actually giving the charity much money. If done for this purpose, the trust pays out more every year to the donor than it makes in returns on its holdings, depleting the principal over time, so that when the donor dies and the trust is transferred to the charity, there’s often little left. The actual contribution “is just a throwaway,” Jonathan Blattmachr, a lawyer who set up hundreds of CRUTs in the 1990s, told Bloomberg. “I used to structure them so the value dedicated to charity was as close to zero as possible without being zero.”
Indeed, this appears to be the case for Romney’s trust as well. Bloomberg obtained the trust’s tax returns through a Freedom of Information Request and found that Romney’s CRUT started at $750,000 in 2001 but ended 2011 with only $421,203 — over a period when the stock market grew. Romney’s trust was projected to leave less than 8 percent of the original contribution to the church (or another charity that he can designate). This, along with the trust’s poor returns — it made just $48 in 2011 — suggest the trust is not designed to grow for the LDS church but just serve as a tax-free holding pool from which annual payments can be disbursed to the Romneys.
This is hardly the first tax-avoidance strategy Romney has employed. It’s well known that he holds offshore bank accounts in Switzerland and the Cayman Islands, but he has used more obscure vehicles as well. There’s the “total return equity swap,” where a taxpayer calls a stock he owns by another name and doesn’t pay taxes on it. There’s the way he’s been avoiding gift and estate taxes through a trust that he set up for his children and grandchildren. And there’s the neat trick whereby private equity firms claim that management fees are capital gains and thus qualify for a lower tax rate than straight income. Bain Capital was known for pursuing an aggressive tax-mitigation strategy (they’re now under investigation for it), and so was Marriott Hotels when Romney was an influential board member.
And it’s not just taxpayers who lose out. “The Romneys get theirs off the top and the charity gets what’s left,” said Michael Arlein, a trusts and estates lawyer at Patterson Belknap Webb & Tyler LLP. “So by definition, if it’s not performing as well, the charity gets harmed more.”
By: Alex Seitz-Wald, Salon, October 31, 2012
“A Matter Of Character And Trust”: Did Mitt Romney Break The Law By Failing To Disclose Delphi Investments?
We now know, thanks to Greg Palast’s recent scoop in The Nation, that Mitt Romney reaped a large financial windfall from the auto bailouts. Romney didn’t talk up this shrewd investment while touting his business experience on the campaign trail, for obvious reasons—he is a strong critic of those bailouts.
But while Romney had ample political reasons to conceal his investment, he apparently had no legal justification for doing so. Federal law requires that candidates disclose stock holdings that are affected by government action—and Romney’s million-dollar (at least) investment in a hedge fund that bought up Delphi stocks surely fits that bill.
Now, unions and good-government groups are calling on the feds to investigate Romney’s oversight.
Thursday afternoon in Toledo, Ohio—where the story has received significant play in local media—United Auto Workers president Bob King joined Palast and Service Employees International Union vice president Tom Woodruff to call upon the US Office of Government Ethics to look into Romney’s financial disclosures and their failure to list the Delphi investments. Along with several groups like CREW and Public Citizen, the union leaders also sent a letter to OGE demanding a formal investigation.
“The American people have a right to know about Governor Romney’s potential conflicts of interest, such as the profits his family made from the auto rescue,” said King. “It’s time for Governor Romney to disclose or divest.”
As Palast reported, a trust in Ann Romney’s name listed “more than $1 million” invested with Elliott Management, run by hedge fund guru and GOP mega-donor Paul Singer. (That’s the minimum amount of disclosure required by law, so it could have been much more than $1 million.) Singer subsequently snapped up large amounts of stock in Delphi at pennies on the dollar, and then, along with other hedge funds, demanded that the government assume pension responsibilities and bail the company out—or they would shut it down, thus crushing General Motors as well.
The government acceded, Delphi became lucrative again and then went public, and Elliott Management and its investors—including Romney—reaped enormous rewards.
Under any rational interpretation of the Ethics in Government Act of 1978, these are holdings that a presidential candidate would need to disclose, because they can be affected by government action. The Romney campaign doesn’t argue that they are not, but rather that, since Ann Romney’s trust is “blind,” there is no disclosure requirement.
Today’s letter points out, however, that Ann Romney’s trust is blind in name only. Romney himself has said that “the blind trust is an age-old ruse, if you will. Which is to say you can always tell a blind trust what it can and cannot do.” Moreover, this is not a federally recognized blind trust of the sort Romney would be forced to create if he won the White House. If it was, he would have never been able to reap his windfall from Delphi, the letter points out.
Whether or not Romney broke the law will come down to this question of how blind this trust really is, and Romney at least has some plausible deniability there. But no doubt this is a story his campaign doesn’t want to see playing out in Ohio five days before the election.
By: George Zornick, The Nation, November 1, 2012
“Show Us Your Model”: Once Again, Republicans Outraged By Facts, Especially When They’re Complex And Sophisticated
It might be easy to believe we’re approaching Peak Trutherism, what with good old-fashioned birthers now being supplemented by BLS truthers and poll truthers. But just you wait—should Barack Obama win this election, we’ll see an explosion of election trutherism that will be truly unprecedented in scope. In the meantime, we can content ourselves with the newest variant, Nate Silver trutherism, which isn’t coming just from conservatives.
In case you don’t know, Silver runs the blog FiveThirtyEight, which after producing a series of highly accurate predictions during the 2008 campaign got swallowed up by The New York Times. Silver makes electoral projections by taking as many different polls as he can find and running them through an algorithm. Rather than just averaging the polls’ results, the algorithm uses a series of variables, including state polls and each pollster’s prior record, to produce a number of different estimates. As of today he gives Obama a 77.4 percent chance of winning, higher than it has been at some points but not too far off from where he has estimated for most of the campaign.
In the last few days, we’ve seen a couple of different Silver narratives emerge as attention to him has increased. First, you have stories about how liberals are obsessing over Silver, “clinging” to him like a raft in a roiling sea of ambiguous poll data. Then you have the backlash, with conservatives criticizing him not because they have a specific critique of the techniques he uses, but basically because they disagree with his conclusions (No way is Obama going to win!) and because he’s a liberal so therefore he must be intentionally warping his data to produce more Obama-friendly results. For instance, Joe Scarborough recently declared that Silver has to be wrong, because while Silver says Obama has an advantage, Scarborough knows the race is a toss-up, which I guess he feels in his gut. The most hilarious criticism came in this column in The Examiner, which noted, “Nate Silver is a man of very small stature, a thin and effeminate man with a soft-sounding voice.” So there.
Then you’ve got the reporter backlash. At Politico, Dylan Byers raised the possibility that Silver would be completely discredited if Mitt Romney won, because “it’s difficult to see how people can continue to put faith in the predictions of someone who has never given that candidate anything higher than a 41 percent chance of winning.” But of course, if you say there’s a 41 percent chance of something happening and then it happens, you wouldn’t actually be discredited, because 41 is not zero. And that’s not even mentioning the huge number of pollsters who make absurdly wrong predictions all the time and continue to ply their trade. Furthermore, as Ezra Klein points out, a lot of these criticisms come from writers at Politico, the most strategy-obsessed, who-won-the-day publication there is. Looking at the election’s eventual outcome systematically is almost an affront to their business model.
But Silver is only a threat to reporters if they see explaining who is going to win as their primary job. And if that’s how they see their job, they really ought to apologize to the public and find another career. Because there are few things as useless to the citizenry as a reporter giving his or her opinion on who is going to win.
After all, there are lots of interesting and revealing things going on in campaigns. There’s a debate about where the country is now, where it has been, and where it ought to go. There are interesting characters we can learn about. There are policy issues aplenty. Even the dramatic moments of the campaign can be reported on and examined without asking, “Will this change the race?” I’m not saying you have to banish any of the who’s-up-who’s down stuff completely (I certainly talk about it here), but if you actually feel threatened by someone coming along with a persuasive answer to the question of who’s going to win that wasn’t derived from listening to campaign spinners, then you really ought to re-examine what you’re doing.
Finally, let me address the question of Silver’s liberal fans. Do they love the fact that he gives them reason to feel optimistic? Sure. But that’s only half the reason they love him. If he were not as rigorous as he is but was producing the same results, liberals wouldn’t be as taken with him as they are. There are Democratic polling outfits out there, and while liberal blogs might cite them fairly often, none of them have produced the same devotion Nate has. On the other hand, would liberals be as interested in Silver if his analysis consistently predicted a Romney win? Probably not. In other words, it took both to make Silver a liberal hero. His projections had to make liberals feel optimistic, and he had to be going about things in the kind of nuanced, detailed way he is. Liberals are pleased as punch that the thing they want to be true can be supported by a highly complex and sophisticated analysis. They want to feel good, but they also want to feel smart.
By: Paul Waldman, Contributing Editor, The American Prospect, November 1, 2012
“An Unreliable Partner”: Romney Struggles For Relevance While Sandy Blows Away Political Pretense And Ideological Nonsense
While the president canceled his campaign schedule and flew northward to join the relief effort, Romney struggled for relevance. Presumably with the best intentions, he tried to transform an Ohio rally into a charitable gathering, where his campaign would collect canned food and bottled water for hurricane victims. But then his campaign workers were caught purchasing cases of food and water at a local Walmart, evidently planning to stage fake giving if necessary.
As he played his role in this flummery, Romney repeatedly refused to answer questions from reporters about his vow to dismantle FEMA as a cost-cutting measure. It would be “immoral” to spend money on federal disaster relief, as he told a debate audience in 2011, when the government is running a substantial deficit. And it is true that the budget and tax policies promoted by Romney and his running mate, Paul Ryan, would require such significant cuts in domestic spending as to decimate disaster relief.
Disbanding FEMA and discarding its skilled personnel apparently would be fine with Romney, who said “absolutely” when asked by CNN’s John King whether he would consign disaster relief to the states rather than the federal government. For that matter he would go still further, said the former Massachusetts governor; best of all would be to let the private sector assume FEMA’s responsibilities.
Nobody asked Romney how a privatized FEMA would function, but it is interesting to imagine the private-equity version of disaster management—and how that entity might squeeze profit from tragedy. Under present circumstances, the Romney campaign denies any plan to abolish FEMA, but who really knows?
In this awful moment Christie, Cuomo, Bloomberg — and every other official watching them — must have realized that should cataclysm strike their city or state, they have a reliable partner in President Obama. The Romney Republicans inspire no such confidence.
By: Joe Conason, The National Memo, November 21, 2012
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