“Politically Worrisome”: What Are The Worst Things We Could Find In Romney’s Tax Returns?
Mitt Romney’s campaign is taking heat for declining to disclose more than the two most recent years’ worth of his tax information. Even conservative commentators such as The Washington Post’s George Will and the Weekly Standard’s Bill Kristol are saying it’s past time to come clean. Of course, members of Romney’s team, unlike their friends on the outside, presumably know what the documents would reveal, so we should probably assume that they have fairly good reason not to release them. Could the criticism Romney would suffer over the contents of the returns be worse than the criticism he’s getting for not disclosing them? Here are some guesses about legal — but potentially embarrassing — things in Romney’s tax returns:
Profits from the financial crash
The vast majority of American families lost wealth in the housing bust of 2007-09 and the financial crisis that came in the middle of it, and millions lost jobs or earnings. But it was possible for a canny or lucky investor to profit from the chaos — especially for a wealthy individual with access to unusual financial products. Maybe Romney made a lot of money through bets on skyrocketing foreclosures or well-timed investments in bailed-out banks. There’s nothing wrong with smart financial planning, but making money on the crash could be awkward for a politician. There’s a tension between promising to make things better and profiting off human misfortune.
A low tax bill because of the crash
There’s also the possibility that Romney’s investments lost some value during the crash years and that he combined this with aggressive exploitation of loopholes to pay a strikingly low tax bill. One rumor was that he managed to pay nothing in taxes, something his campaign has denied. But would paying $2.75 really look all that different from paying $0? A super-low tax bill would turn Romney into the poster child for President Obama’s very popular “Buffett rule” proposal, which aims for a minimum tax level on high-income individuals.
Swiss bank amnesty
We know from the tax documents Romney has released that he once had a Swiss bank account, a fact that the Obama campaign has played up in ads. But his 2010 tax return did not include a Report on Foreign Bank and Financial Accounts form (“FBAR” to accountants) detailing his offshore investments. In 2009, the Swiss government began to relent on its traditional banking secrecy rules, and banks turned over information about tens of thousands of American tax scofflaws to the U.S. government. To help deal with the crush, the IRS staged a limited-time amnesty in 2009 for American citizens with previously non-disclosed foreign accounts to pay their back taxes without penalty. It’s possible that earlier tax documents or the 2010 FBAR would show that Romney took advantage of the amnesty. While legal, this would amount to a problematic confession of past wrongdoing.
None of the above
The possibilities are endless. Romney’s vast wealth has already provided plenty of campaign fodder — from his car elevator to his proposed $10,000 bet with Texas Gov. Rick Perry during a debate — so almost any additional details about his finances would add fuel to the fire. But the most likely candidates for compromising revelations could relate to the 2008-09 period. Romney isn’t disclosing his 2006 or 2007 taxes, but by his own two-year standard he would have had to if he had won the 2008 Republican nomination. That makes the time between his presidential runs — a period that coincides with major upheavals in financial markets and bank secrecy practices — far and away the most likely window for something more politically worrisome than a reputation for reticence.
By: Matthew Yglesias, The Washington Post, July 20, 2012
“Quasi-Suicidal”: Did Mitt Romney Pay Any Federal Taxes At All In 2009?
On the issue of Mitt Romney’s tax returns, my colleague George Will put it simply: “The cost of not releasing the returns are clear. Therefore, he must have calculated that there are higher costs in releasing them.”
The question is what could be in them that would be so damaging to the Romney campaign. Right now, the most popular theory is that Romney simply didn’t pay any federal taxes at all in 2009. As Joshua Green wrote, ” It’s possible that he suffered a large enough capital loss that, carried forward and coupled with his various offshore tax havens, he wound up paying no U.S. federal taxes at all in 2009.”
But the tax experts I’ve spoken to are skeptical. “Romney had a $4.8 million capital loss carryover coming into 2010,” says Edward Kleinbard, a professor of tax law at the University of Southern California. “So that means no capital gain income in 2009. If you look on the first page [of his 2010 tax return], though, he had lots of ordinary income (interest mostly), and dividends, which are taxed at the same rate as capital gains but which cannot be sheltered from tax by capital losses. So presumably he had some positive income tax in 2009.”
Roberton Williams, a senior fellow at the Tax Policy Center, agrees. “It’s unlikely that his taxable income was zero or even close enough to zero that his credits would zero out his tax liability completely,” he says.
But Daniel Shaviro, a tax professor at New York University, isn’t so sure. “I think there’s an excellent chance that [Romney] didn’t pay any taxes in 2008 or 2009,” he says. But to get from a small federal tax liability to no federal tax liability, Romney would have needed to engage in incredibly aggressive tax planning. Shaviro mentions picking loser investments to get some benefits from “loss harvesting,” unusual tax shelters, and a bevy of other stuff that, frankly, I don’t totally understand.
The overriding question, though, is why would Romney do any of this. As Shaviro says, “If you were running for president and in his position, wouldn’t you think of telling your transaction people not to take you down too low in 2008 and 2009?”
When I asked whether these kinds of structures were simply too difficult to cleanly unwind over a couple of years, Shaviro was skeptical. “The Caymans structures might take some time to unwind, and there might be tax planning issues about not screwing up the unwind too badly, but come on, the guy has been in public life since 2002 and was aiming for the White House from the start. Plus, suppose he had tax shelters in 2009 that created losses. It’s not complex not to do these deals – all you have to do is…not do them.”
For what it’s worth — and, since I haven’t seen Romney’s 2009 tax return, it’s not worth much — my guess is he paid some federal taxes in 2009. The sort of tax sheltering he would have needed to get to zero would be quasi-suicidal for a presidential aspirant. But his effective federal tax rate may only have been 3 or 4 or 5 percent, which would be nearly as bad as zero. Add in a couple of shelters that Romney fears would look particularly bad, and it’s probably enough to persuade him that enduring a bit of bad press for tax decisions people think he might have made is preferable to a media feeding frenzy over tax decisions he definitely made.
The question none of this answers is why Romney didn’t clean up his taxes in 2008 and 2009. But it’s always worth remembering that the people running for office are human beings who procrastinate and make bad decisions and get distracted by other things. And given that Romney moves in a world where aggressive tax planning is the norm rather than the exception, he might simply have failed to recognize what a priority simplifying his taxes really was. My hunch is that the person spending the most time wondering why Romney didn’t get his taxes in order in 2008 is…Mitt Romney.
By: Ezra Klein, Wonkblog, The Washington Post, July 17, 2012
“Just A Private Family Matter”: Mitt Romney Outsources Questions About Finances
We have no way of knowing just yet whether Ann Romney’s explanation in an interview of her husband’s refusal to release tax returns was just her own effort to get past a difficult question, or represents the Final Word from the campaign. If it’s the latter, you gotta admit it’s pretty damn bold, suggesting that Mitt’s finances—not just his tax returns, but his wealth generally—are a private family matter on which the news media and the American people are strictly on a need-to-know basis. And all they need to know is that the Romneys tithe (and no tither has ever, ever been dishonest about money, right?) and that Mitt turned down a governor’s salary in Massachusetts that probably represented a rounding error in his investment income.
This talking-point would barely pass the smell-test even if Mitt had always resolutely treated his “success” (as measured by his fabulous wealth) as irrelevant to the presidential campaign, instead of being the primary reason Americans should entrust him with the presidency, even if he won’t much talk about what he would do in that office beyond killing ObamaCare and inspiring confidence in every direction.
You have to wonder if in the future Mitt is going to “outsource” all questions about his finances to his wife, and then object that anyone who complains about it is engaging in personal attacks on his family. That tactic would certainly be consistent with his general habit of expressing outrage when critics look at his biography or his tax-and-budget plans and suggest things just don’t add up.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, July 19, 2012
“The Prevailing Order”: The Rich Really Are Different
In the last couple of years, we’ve occasionally seen stories where Wall Street types justify their enormous compensation packages by saying they work really, really hard. They stay late, they work weekends, they just keep their noses to the grindstone, and that’s why they get paid what they do. Sure, $30 million a year is a lot of money. But the hedge fund manager who made it probably worked 1,000 times harder than the electrician who made $30,000. Right?
I thought of those Wall Streeters and their rhetoric about hard work when considering the question of Mitt Romney’s tax returns. One of the things we’ve found out in the whole when-did-Romney-leave-Bain controversy is that even after he retired/went on a leave of absence, he was being paid at least $100,000 a year for doing what he swears was absolutely nothing. That’s a lot of money for doing nothing, at least to people like you and me, but remember that to Mitt Romney, it’s peanuts. According to the information he has released, he made over $42 million in 2010 and 2011 without doing any actual work. He hasn’t held a job in five and a half years, since he left the Massachusetts governor’s office. Tens of millions of dollars just keep pouring into his many bank accounts, without him lifting a finger. And of course, he pays a far lower tax rate on all that income than people who work for a living.
But it really seems that Romney has a hard time understanding why that would rankle people. The entire system is set up to allow people like him to play by a set of rules that was established by the wealthy, for the wealthy; but when you’re the beneficiary, it seems like the prevailing order is a just order. And what Romney wants is to make income from investments and inheritances taxed at an even lower rate. You probably haven’t heard, since there hasn’t been much discussion about it, but Barack Obama’s official position (even if he’s not going to do much about it) is that investment income should be taxed at the same rate as wage income; in other words, money you work for shouldn’t be taxed more (as it is now) than money you make when your money makes you more money. I’m sure that if somebody asked Mitt Romney about taxing all income at the same rate, he’d think the idea was nothing short of insane.
It’s not impossible for someone to benefit greatly from that system and still manage to wrap their heads around the fact that it’s unfair. There are plenty of rich people who do (Warren Buffett is the most visible example). I keep returning to Mitt’s repeated comments that of course he took advantage of every tax loophole he could find to make sure he paid as little as possible. We could argue about whether that’s unpatriotic, but the thing is that for most people who do a job and get paid a salary, there just aren’t those kinds of loopholes available. Not only can’t they afford to hire a team of accountants and tax lawyers; even if they could, there wouldn’t be much those people could do for them.
There is obviously something in Mitt Romney’s pre-2010 tax returns that he really, really doesn’t want people to see. Just how awful it is, we have no way of knowing; it could be something truly shocking, or just more of the offshore accounts and low tax rates we already know about from his 2010 return. But whatever it is, revealing it would no doubt have the effect of reminding people just how different the rules people like Mitt Romney play by really are. And if he’s afraid of that, maybe he’s more self-aware than I’m giving him credit for.
By: Paul Waldman, Contributing Editor, The American Prospect, July 19, 2012
“We The People vs You People”: Why Mitt Romney Won’t Release His Tax Returns
What’s Mitt Romney hiding, exactly? Why won’t he release his long-form birth certificate college transcripts tax returns? Well, his tax returns are probably just the words “I DON’T HAVE TIME FOR THIS PEASANT WORK I’M QUITE RICH YOU SEE” scrawled in a Montblanc on an otherwise blank 1040EZ, but we’ll likely never know: He refuses to release any returns from prior to 2010 (he claims he’ll get around to showing us his 2011 return), which is all sort of weird because the guy has been planning on running for president for a while, and one thing presidential candidates do is release a whole bunch of tax returns, a practice pioneered by this guy named George Romney, the kindly puppeteer/scientist who crafted/programmed young Willard.
Ann Romney, whose horse is competing in the Olympics, went on the TV to patiently explain that, no, the Romneys would not be sharing any more information on their finances. This is an actual thing she said, on ABC: ““We’ve given all you people need to know and understand about our financial situation and how we live our life.”
Whoa, there, Ann. When you’re being painted as a living embodiment of out-of-touch plutocratic wealth, maybe avoid the construction “you people.” Even if you just mean it to refer to “the press,” which it seems like you probably did.
People have some theories about what is so bad in Romney’s tax returns. Some people think he might not have paid any taxes at all one year, which Romney’s campaign denies. (But how do we know?) Matt Yglesias, who points out that the guy already ran for president once so you’d think he’d have cleaned his tax situation up a bit, says maybe there’s something in the very recent past that Mitt doesn’t want exposed (like his disclosing his secret Swiss bank account to the IRS to avoid criminal prosecution in 2009?).
There are a bunch of other reasons, too, and all of them can be summarized as “he won’t release them because they will confirm what we already basically know about Romney’s wealth and business practices.”
But Ben Domenech and Erick Erickson have a different idea of exactly what Romney’s hiding. A brilliant, counterintuitive idea. This is for real their actual theory:
Ben Domenech has been doing some pretty solid reporting in The Transom (you’ve subscribed, haven’t you?) about what might be in Mitt Romney’s taxes. He offers this morning the best and most informed theory.
Why most informed? Well, he talked to people who were familiar with the veep vetting process for McCain in 2008.
Here’s what he reports:
So what about the years before 2009? We know he turned over more than two decades of returns to the McCain campaign during the veepstakes vetting process. What was in them? “Mitt’s taxes were complex, but clean. He overpaid his taxes…”
That’s so simple, I can’t believe I didn’t think of it before. Mitt Romney doesn’t want anyone to know that he… overpaid his taxes. The guy whose effective rate was 14 percent in 2010, the one return he released to the public, definitely paid way more than that in his secret, hidden, earlier returns. He is embarrassed, I guess. He doesn’t want his rich financier friends to laugh at him.
By: Alex Pareene, Salon, July 19, 2012
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