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 The Tea Party Is Responsible For Newt Gingrich
We may not be attributing Newt Gingrich’s rise to the tea party. But maybe we should.
Even as the movement’s influence in the GOP appears to have waned over the past year, there remains one major remnant of what happened in 2010: anti-establishment fervor.
The tea party spurred momentum and turnout for the GOP two years ago, but it also caused it some headaches in the primaries, turning aside candidates who were clearly favored by the party establishment in favor of conservative wild cards that went on to mixed results in November.
Sound familiar?
That very same anti-establishment mentality has spurred any number of anti-Mitt Romney candidates to frontrunner status in the 2012 GOP presidential race. And when it finally looked like Romney was the presumptive nominee before South Carolina, the base recoiled in much the same way it did in a series of 2010 Senate races, delivering a huge win for Gingrich.
And in doing so, the tea party movement served notice that it’s still very much alive, albeit not as cohesive or well-branded.
In recent days, some smart political analysts have begun to question the theory that the major party elites have overwhelming influence when it comes to picking their nominees.
The New York Times’s Nate Silver wrote about this at length on Sunday, referring to political scientist Marty Cohen’s book “The Party Decides.”
Cohen’s theory states that, while candidates and voter preferences matter, nominees are almost always chosen in a sort of long-running negotiation among party elites, who effectively pave the way for voters to make the most logical choice and/or pick the most electable candidate. In other words, voters have a choice, but it’s heavily influenced by party bigwigs.
That theory, according to some, simply doesn’t apply to the 2012 GOP presidential race.
“The competing paradigm might be called ‘This Time Is Different,’” Silver writes. “Under this interpretation, elite support and the ground game do not matter as much as usual. Instead, success is more idiosyncratic: personalities matter a lot, and nominations are determined based primarily on momentum and news media coverage.”
This makes a lot of sense — particularly when it comes to Gingrich — but there seems to be more to it.
Namely, the tea party.
After all, exit polls from Saturday’s South Carolina primary showed 64 percent of voters identified as tea party supporters, and Gingrich won nearly half of their votes — almost twice as many as Romney. Indeed, the fact that nearly two-thirds of voters in any primary say they support a certain political movement shows what kind of influence it has.
But even if you look beyond the exit poll, it’s pretty clear that the tea party mentality is very much a part of what Gingrich has been able to accomplish. The same tea party mentality that was responsible for Sharron Angle, Christine O’Donnell, Ken Buck, Marco Rubio and Rand Paul is now helping Gingrich.
In most of those cases, there was another GOP candidate who was favored by the GOP establishment but didn’t light any fires among the conservative base. So the base chose somebody else.
That’s not to say that Gingrich hasn’t been a capable candidate who was able to swing a state by 25 points in a week’s time. In fact, it’s just saying that his stealth maneuvering has more impact today, because voters are acting more independently of party leaders.
For some reason, political observers have stopped attributing this to the tea party. But it’s very much a lingering effect of what the tea party did in 2010 or, at the very least, is a result of the same set of circumstances that gave rise to the tea party.
The question now is whether it’s enough, as it was in 2010 Senate races, to push a supposedly less-electable wild card candidate to a major party’s presidential nomination.
As we have written before, that is a much steeper hill to climb, and we remain skeptical that the tea party will actually pick the GOP nominee.
But the influence of the tea party lives on in today’s Republican Party.
By: Aaron Blake, The Washington Post, January 24, 2012
“A Club Of Coddled Millionaires”: Newt Gingrich Is Obama’s Best Surrogate
The most important figure in Tuesday night’s State of the Union address wasn’t on the House floor. In fact, he hasn’t taken a seat in front of the chamber in 13 years.
But as he campaigned for the Republican presidential nomination in Florida, former House speaker Newt Gingrich was doing more to boost President Obama’s reelection prospects than anything Obama himself could do.
Obama’s address, which marked the unofficial start of his campaign, aimed to take the economic misery that threatens to doom his reelection and turn it into class resentment: the privileged wealthy against ordinary Americans. “We can either settle for a country where a shrinking number of people do really well, while a growing number of Americans barely get by,” he said, in remarks prepared for delivery. “Or we can restore an economy where everyone gets a fair shot, everyone does their fair share, and everyone plays by the same set of rules.”
Gingrich assisted in making this case by helpfully arranging for Republicans to serve as fat-cat foils. The former speaker, whose allies had already branded Mitt Romney a job-destroying “predatory capitalist,” successfully goaded the former Massachusetts governor into releasing tax returns that reveal him to be making millions of dollars per year from investments and paying paltry tax rates — while tucking money in the Cayman Islands, Fannie Mae and Freddie Mac stock and a Swiss bank account. Gingrich exulted Tuesday that the already rich Romney is “getting richer off Fannie Mae and Freddie Mac.”
Romney, suddenly faltering in his bid for the nomination, found himself declaring in Florida on Tuesday that “banks aren’t bad people” — a version of his earlier claim that “corporations are people.” He continued to characterize Gingrich as an “influence peddler,” a tool of K Street and an exorbitantly compensated Freddie Mac lobbyist. Gingrich’s campaign, in turn, answered with the implausible claim that it “can’t find” all of the lucrative contracts the candidate had with Freddie. (Did they look under the sofa cushions?)
Obama strategist David Axelrod couldn’t have arranged it better: On the very day the president tried to turn the campaign into a contest between the 1 percent and the 99 percent, the Republicans launched an all-out war between the Gingrich haves and the Romney have-mores.
A new Washington Post/ABC News poll shows the damage done. Two weeks ago, Romney was viewed favorably by 39 percent of Americans and unfavorably by 34 percent. Incredibly, he is now viewed favorably by only 31 percent and unfavorably by 49 percent. Among independents, who will decide the outcome in November, Romney is viewed unfavorably by a margin of 2-to-1.
By no coincidence Obama has grown in public esteem over that time. His favorable rating is up to 53 percent from 48 percent in December, and his unfavorable rating has dropped to 43 percent from 49 percent.
Gingrich himself remains so unpopular that his own chances of beating Obama seem dim: His 29 percent favorability rating is about where it was before he was dumped as speaker by his House colleagues in 1998. But by making Romney as unpopular as he is, he has made Obama look good by comparison.
Gingrich has long regarded himself as a “transformational figure” in world history, and now he’s about to prove it: For the second time in his career, he is about to reelect a Democratic president.
After he led Republicans to victory in 1994 and became House speaker, his ill-advised standoff with President Bill Clinton led to a government shutdown and allowed Clinton to rebound to an easy reelection in 1996. Now, just two years after Republicans swept to power in the House, Gingrich is again providing a Democratic president with an unexpected path to victory.
To press his Gingrich-given advantage Obama made plans to highlight the “Buffett Rule” and invited to the speech Warren Buffett’s secretary, who supposedly pays a higher tax rate than Buffett does. “Let’s never forget,” Obama said in his prepared text, “millions of Americans who work hard and play by the rules every day deserve a government and a financial system that do the same. It’s time to apply the same rules from top to bottom: No bailouts, no handouts, and no cop-outs.”
But it was hardly necessary for Obama to make the case. Gingrich had already turned the Republican candidates into a club of coddled millionaires.
By: Dana Milbank, Opinion Writer, The Washington Post, January 24, 2012
“Self Deportation”: Attrition Through Enforcement Is A Real Thing, And It Isn’t Pretty
Mitt Romney unveiled a novel solution for illegal immigration during Tuesday night’s GOP debate, saying that he’d rely on “self-deportation” to reduce the number of unauthorized immigrants in the US.
Or at least it sounded novel. As my colleague Clara Jeffery notes, while “self-deportation” might sound like something you don’t want your parents to catch you doing, it’s actually an old euphemism for an immigration strategy of “attrition through enforcement.” What “self-deportation”—the favored approach to immigration of the GOP’s right-wing—actually means is making life so miserable for unauthorized immigrants that they “voluntarily” leave. Here’s Mark Krikorian of the Center for Immigration Studies (the anti-immigrant think tank that tried to mainstream the “terror baby” conspiracy theory) explaining the concept in 2005:
Among the other measures that would facilitate enforcement: hiring more U.S. Attorneys and judges in border areas, to allow for more prosecutions; passage of the CLEAR Act, which would enhance cooperation between federal immigration authorities and state and local police; and seizing the assets, however modest, of apprehended illegal aliens.
These and other enforcement measures would enable the government to detain more illegal aliens; additional measures would be needed to promote self-deportation. Unlike at the visa office or the border crossing, once aliens are inside the United States, there’s no physical site to exercise control, no choke point at which to examine whether someone should be admitted. The solution is to create “virtual choke points”—events that are necessary for life in a modern society but are infrequent enough not to bog down everyone’s daily business. Another analogy for this concept to firewalls in computer systems, that people could pass through only if their legal status is verified. The objective is not mainly to identify illegal aliens for arrest (though that will always be a possibility) but rather to make it as difficult as possible for illegal aliens to live a normal life here.
This is the right-wing’s answer to the question of how you deport 11 million unauthorized immigrants: You don’t. You force them to “deport themselves.” Although immigration reform advocates would prefer a solution that involves a path to citizenship for unauthorized immigrants already here, Romney and his top immigration advisers believe they can remove millions of people through heavy-handed enforcement that makes life for unauthorized immigrants intolerable. This approach is notable for its complete lack of discretion and flexibility. Unauthorized immigrant parents with citizen children who need to go to school? Americans who are married to an undocumented immigrant who needs medical treatment? “Self-deportation” hits them all with the same mailed fist.
We can see how this concept has been applied in states like Arizona and Alabama, where local authorities have been empowered to act as enforcers of immigration law. Alabama takes the choke point theory even more seriously than Arizona—everything from enrolling in school to seeking health treatment has been turned into a so-called choke point. The moral, social, and economic consequences of the strategy are secondary to inflicting enough suffering on unauthorized immigrants in order to force them out of the country.
Kris Kobach, the Kansas Attorney General secretary of state who helped write both restrictive immigration laws and recently endorsed Romney, bragged about the impact of the Alabama law after it passed last year:
“There haven’t been mass arrests. There aren’t a bunch of court proceedings. People are simply removing themselves. It’s self-deportation at no cost to the taxpayer. I’d say that’s a win.”
Alabama’s immigration law has actually been such a disaster that the state is trying to figure out a way to repeal parts of the law. But make no mistake, when Romney is discussing “self-deportation,” he’s talking about creating a United States where parents are afraid to register their kids for school or get them immunized because they might be asked for proof of citizenship. He’s talking about the type of country where local police can demand your immigration status based on mere suspicion that you don’t belong around here. “Self-deportation” is just a cleaner, less cruel-sounding way of endorsing harsh, coercive government polices in order to make life for unauthorized immigrants so unbearable that they have no choice but to find some way to leave. The human cost of such an approach, let alone what it might do to American society, is viewed as a price worth paying.
By: Adam Serwer, Mother Jones, January 23, 2012
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