“The Exotic Manipulation Of Numbers”: The Secret In Mitt Romney’s Tax Returns
To paraphrase Rhett Butler, I don’t give a damn if Mitt Romney releases more of his tax returns. I expect to learn nothing from them, aside from the fact that he is very rich and has paid less in taxes than he has acknowledged. He has probably taken advantage of all the loops and dodges in the tax code, piling trusts on top of trusts, securing wealth for Romneys yet unborn — gelt unto the third generation, little taxed, slightly taxed or taxed not at all.
“Let me tell you about the very rich,” F. Scott Fitzgerald once wrote. ’Scuse me, Scotty, let me tell you about them: They don’t pay much in taxes.
This is what the average person would learn if all of Romney’s tax filings hit the light of day. He has so far divulged just his 2010 return and the estimate for 2011, and the Obama camp, smelling blood, has demanded more. The din has reached such a level that even some conservatives are entreating Romney to reveal additional filings. They are not, however, imploring their candidate to identify his bundlers — for this might actually reveal who has their hooks into him. The filings, I promise you, will show loopholes and financial black holes that make taxable income disappear. What we will not see is anything revelatory or, as some insist, genuine insights into the character of the candidate.
Certainly, this has been the case in the past. Richard Nixon disclosed his taxes preceding the 1968 presidential campaign. He reported hefty earnings averaging $200,000 in his years as a New York lawyer, but there was nothing in the forms relating to occasional bouts of drunkenness, paranoia, excessive self-pity or a proclivity to listen to the telephone conversations of others.
Similarly, Bill Clinton, in his pre-White House filings, showed a gross 1990 income of $268,646, but the box (32a) relating to possible extramarital relations in the Oval Office was left blank. No doubt it was an oversight.
George W. Bush’s tax forms were as vacant as he was of any suggestion that he moved his lips when he read and would, if given the chance, tank the economy and lead the nation into two wars, mismanaging both.
By and large, the tax filings tell you nothing you don’t already know. But the refusal to release them is a different matter. In Romney’s case, this is his one and only stand on principle, an odd example of political bravery. He has flipped on abortion, gun control and, of course, health-insurance reform, his signature achievement as governor of Massachusetts. But not on releasing his taxes. Others have been recalcitrant. Ronald Reagan didn’t want to do it (he charged his daughter Maureen interest on a loan) but ultimately did.
In general, presidential and vice presidential candidates have released their returns. Maybe this was because most of them were public servants whose salaries were already known and whose wealth was modest. Others, though, were persons of considerable wealth — Lloyd Bentsen, John Kerry, John Edwards — who laid it all out on the table. (I wonder if Edwards, if he still had presidential prospects, would have deducted his latest child.)
It’s impossible to know what Romney is not revealing. But it is instructive to contrast him to his father, George, who was an auto executive and governor of Michigan. When George Romney ran for president in 1968, he released 12 years of income tax returns. But he was essentially salaried — his remuneration set either by statute or by a board of directors — and so really he was divulging little. Maybe more important, he actually made something (cars) or did something (governed). His son not only manufactured nothing but earned his wealth the new way — by financial manipulation, leveraging and such. On paper, it could look ugly.
For Mitt Romney, there are no assembly lines, no factories or mines — just back offices and computer terminals and such esoterica as the infinitesimal difference between what the Libor rate should be and what it is. He was loyal to no company, no industry — just to his investors. The making of such money is concealed, based on the exotic manipulation of numbers and the disregard of people. Only a relatively few know how to do this sort of thing, and they don’t much like to talk about it. Romney, as we already know, is one of those people. He hides his taxes not because it would reveal anything new about him, but because it would reveal what he has always known about us: We’re suckers.
By: Richard Cohen, Opinion Writer, The washington Post, July 23, 2012
“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
“The Man Without a Past”: Mitt Romney, A Barbarian At The Gate?
Mitt Romney has an identity problem. He is running for president by making promises about America’s future, but as a man who is largely without a past. Not only has Romney renounced many of his previous positions — on abortion, immigration, gun control, climate change, and the individual mandate he once championed as Massachusetts governor. He also refuses to divulge many details about what even he has said is his main qualification for the White House in a faltering economy: his successful career in “private equity” from 1984 to 1999 (or thereabouts).
What is it about the private equity world that Romney doesn’t appear eager to bring up? As I explain in an article in the current issue of National Journal, “Mystery Man,” Romney was basically what used to be known as a “barbarian at the gate.” The term “private equity” sounds respectable, but it is a euphemism for the old leveraged buyout deals we remember from the 1980s, the era of corporate raiders like T. Boone Pickens and Henry Kravis. After junk-bond king Michael Milken, who funded a lot of those takeovers, went to jail, the industry decided to rename itself in order to remove the taint.
This is Mitt Romney’s true world. As the founder of Bain Capital, Romney became a brilliant LBO buccaneer who specialized in buying up firms by taking on a lot of debt, using the target firm as collateral, and then trying to make the firm profitable — often by breaking it up or slashing jobs — to the point where Bain and its investors could load up the firm with even more debt, which Bain would then use to pay itself off. That would ensure a profit for Bain investors whether or not the companies themselves succeeded in the long run. Often, burdened by all that debt, these bought-out companies did not succeed, costing thousands of jobs as they were downsized, sold off and shuttered. Other times they did phenomenally well, as in the case of Sports Authority and Domino’s Pizza.
But job creation is irrelevant to Bain’s business model, which is all about paying back investors. Nor does the long-term fate of the companies that private-equity firms buy up matter crucially to Bain’s bottom line (though of course success is better). The only real risk for Bain is that these companies fail to make enough initial profit in order to permit Bain to pile on more debt and extract a payout, so that it can make back its investment quickly.
Though he started off dabbling in less profitable “venture capital,” Romney quickly saw the high-return, low-risk potential of LBOs in the mid-1980s and ultimately was involved in about 100 such deals, which made him a true Wall Street tycoon. He then maximized his take further by socking away his gains in offshore shelters from Bermuda to the Caymans and using capital gains tax breaks and loopholes to reduce the rate of his 2010 tax return (the only one he’s released) to 13.9 percent, a far lower rate than the one paid by middle-class Americans. Many of Wall Street’s big dealmakers do the same with their profits, employing whole teams of international tax accountants.
But none of these dealmakers has ever run for president. This is perhaps the main reason for Romney’s reticence: It’s not just that being honest about Bain’s real business pulls back the veil from the ugly heart of financial capitalism. It’s also that this may be the hardest year since 1932 for a Wall Street big-shot to make a bid for the White House: The former Masters of the Universe remain unpopular because of the historic recession they did so much to create. So it’s hardly a surprise that Romney won’t dwell on practices that his onetime GOP primary opponent, Texas Gov. Rick Perry, labeled “vulture” capitalism.
None of this is necessarily disqualifying for a presidential candidate; on the contrary. Americans have always admired business success, no matter what package it comes in. It is part of the nation’s lore going back to the rags-to-riches tales of Horatio Alger and F. Scott Fitzgerald, and the storied careers of Andrew Carnegie and J.P. Morgan. Romney is undoubtedly one of the most successful capitalists ever to run for president. Based on his record at Bain, as governor, and at the Olympics, there is little doubt that he is a numbers whiz who is handy with a budget, and America has serious budget problems. “At the end of the day, people are going to know Mitt Romney was a super-successful businessman, and they’re going to factor that in,” says Vin Weber, a senior Romney adviser. “And most people will find that attractive and not negative.”
Maybe so. But as the Obama attacks persist, even some in the Romney camp fret that they are watching a Democratic version of the attacks that permanently defined Michael Dukakis as weak in 1988 and “Swift-boated” an unresponsive John Kerry in 2004. “That worries me a little bit,” Weber admits.
The Obama attacks also may be resonating because they compound an image of aloofness, of detachment from the lives of ordinary Americans, which has dogged Romney for many years. He is hardly the first rich man to run for president, yet he lacks the populist touch of previous successful candidates. Franklin Delano Roosevelt also came from a wealthy patrician family, but by the time he ran for president as a polio victim who had suffered among the people in Warm Springs, Ga., FDR had reputation for transcending that background. So did John F. Kennedy, whose father’s vast but somewhat shady Wall Street fortune financed a rich-kid bid for Congress, the Senate, and then the presidency. But JFK’s charisma and war-hero reputation, and his ability to connect with people — for example, by famously telling a hushed crowd of mothers who had lost sons in World War II that “I think I know how you mothers feel, because my mother is a Gold Star mother too” — made him a popular figure.
Not so Romney. His record contains few such man-of-the-people moments (ironically, his best argument may be his successful health-care law in Massachusetts, another thing he doesn’t want to talk about). And his uncommon Mormon religion, about which he is also reticent, further contributes to the image of a Man Hard to Know. This is the same Romney who declared during the hard-knocking primaries that the $350,000 he earned in speaking fees wasn’t a lot of money, who said that his wife drives a “couple of Cadillacs,” who grinningly bet Rick Perry $10,000 on a whim, and who boasted that even wealthy Ted Kennedy had to “take a mortgage out” to beat him. And those are moments when Romney was trying to be one of the guys. What has become clear is that he is part of a world of super-elites who live in a universe apart from most Americans.
Romney may well make a very good president. But we should know who we’re getting.
BY: Michael Hirsh, The Atlantic, July 21, 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
“Magic Asterisks”: Buffett Rule Is Not Raising A Tax; It’s Closing Republican Tax Loopholes
The debate over the Buffett Rule is missing something important. As it stands, the fight is between Democrats who believe millionaires shouldn’t pay a lower tax rate than the middle class vs. Republicans who says no one’s taxes should go up by any amount at any time for any reason.
That’s a legitimate fight, to be sure, but there’s more to it: approving the Buffett Rule would mean closing a loophole, and in the larger context of the debate over tax policy, this makes all the difference in the world.
Let’s step back for a second. Paul Ryan’s House Republican budget plan appears to add an additional $5.4 trillion to the deficit over the next decade. Ryan insists that’s not the case — once he “clears out all the special-interest loopholes,” his numbers will start to add up.
Which loopholes? Well, it turns out that Ryan refuses to say. Maybe they’re secret loopholes; maybe they’re imaginary loopholes; but either way, he hasn’t identified any — literally, not one — loophole he’s willing to close to help pay for his own agenda. It is, as Paul Krugman put it, the “mystery meat” of the Republican plan.
“Oh, yeah?” my Republicans friends ask, “well why don’t Democrats come up with some loopholes to close?”
And therein lies the point: the Buffett Rule closes a loophole. It’s a quirk of the tax code that certain millionaires who enjoy private-equity riches pay a lower tax rate than middle-class families, and approving the Buffett Rule would not only mean establishing a degree of fairness, it would also mean scrapping this loophole.
The point is not lost on President Obama, who made this observation on Wednesday:
“I’d just point out that the Buffett Rule is something that will get us moving in the right direction towards fairness, towards economic growth. It will help us close our deficit and it’s a lot more specific than anything that the other side has proposed so far.” [emphasis added]
In other words, where Paul Ryan is vague and evasive, Obama is being direct and specific. The president is identifying actual loopholes he wants to see closed (Buffett Rule, corporate-jet loophole, tax subsidies for oil companies), which would total tens of billions of dollars in the coming decade. Meanwhile Republican leaders talk about loopholes, but choose not to back this talk up with anything substantive.
One approach represents an honest budget policy. The other, relying on magic asterisks, is a fraud.
By: Steve Benen, The Maddow Blog, April 13, 2012
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