The “Bane” Of His Existance: How Mitt Romney Stiff’s The IRS
Unlike Mitt Romney, most Americans who will pay their taxes today can’t afford fancy accountants. But Romney has reluctantly made public his tax returns, and thus shared valuable strategies to ensure that he pays a far lower rate than, say, Warren Buffett’s secretary. Citizens for Tax Justice recently waded through Romney’s 2010 return—in which his $22 million in income was miraculously taxed at just 13.9 percent—to come up with a handy primer for how you, too, can beat the IRS at its own game. To paraphrase:
1. Don’t work for a living
The tax rate on money earned actually working (“salaries and wages”) can be more than double the rate on money earned sitting around watching your investments go up in value (“capital gains”), thanks to the work of other people. Almost all of Romney’s income is taxed as capital gains.
2. If you work, disguise your compensation as capital gains
About half of the $15 million in capital gains and dividend income Romney reported in 2010 was actually compensation for his work at Bain Capital. But using a tax loophole favored by private-equity guys, he was able to get paid by taking equity stakes in deals that he put together (“carried interest,” in tax parlance) instead of in the proletarian form of a fully taxable salary. Bonus: This allowed Bain to avoid paying Medicare payroll taxes.
3. Give to charity—but not with cash, checks, or money orders
In 2010, Romney was able to write off $1.5 million worth of Domino’s Pizza stock he donated to a charity. It is likely that he originally received the stock as compensation from Bain, in which case the price he paid for it would have been close to zero. In this scenario, by donating the stock instead of selling it and donating the cash, Romney would have saved about $220,000 in taxes.
4. Give to charity—but not now
Romney’s return reports income from the W. Mitt Romney 1996 Charitable Remainder UniTrust. Not only is the trust tax exempt, but when Romney set it up 16 years ago, he got a tax deduction for making a charitable donation. Though the money in the trust is eventually supposed to go to charity, Romney can receive income from the trust for a number of years—quite possibly for the rest of his life.
5. Give to charity—your own
In 2010 Romney made a tax-deductible, $1.5 million donation to the Tyler Charitable Foundation, which he controls. Commanding your own foundation allows you to curry favor with political and business allies by donating money to their pet organizations and causes. For instance, in 2010 the Tyler Charitable Foundation donated $100,000 to to the George W. Bush Library.
6. Do not invest in America
Certain foreign investment vehicles allow you to avoid certain taxes. For example, Romney’s Individual Retirement Account could bypass the Unrelated Business Income Tax by investing through a foreign corporation. Though it’s hard to know whether Romney availed himself of those kinds of savings, he has invested substantially in foreign entities, including ones based in offshore tax havens such as Bermuda, the Cayman Islands, and Luxembourg.
7. Invest in sexy financial instruments
Romney earned $415,000 from an investment that gets special tax treatment: Through an accounting loophole, 60 percent of the profits from the investment are treated as long-term capital gains, a designation that has tax benefits, no matter how long the investment is held.
8. Borrow money to invest
While you can’t deduct interest from car loans or credit cards, you can write off interest on the money you borrow to make certain types of investments—for instance, if you borrow from a broker to buy stock (a “margin loan”). Portfolio management fees are also write-offs. A fellow like Romney, who makes his millions mainly from investments, could probably deduct a fair sum.
9. Push the limits of the law
When you engage in a type of transaction that the IRS views as potentially abusive, you must disclose it in a separate form. In 2010, Romney filed six such forms.
10. Be part of the 1 percent
When it comes to taxes, it costs money to save money. You’ll need to hire lawyers to help you set up tax-exempt charities and trusts or exploit offshore tax havens—and a professional money manager if you plan to invest in sexy financial instruments. It probably won’t be cost effective if you aren’t already rich, but any hard-working son of a governor can land a job at a private-equity firm and start getting paid in carried interest. Bonus: You might make enough money to one day run for president.
By: Josh Harkinson, Mother Jones, April 17, 2012
“Twisted Minds, Politics Edition”: Mitt Romney’s Remarkable Work of Staggering Dishonesty
As Greg Sargent, Steve Benen, and others have amply demonstrated, Mitt Romney has a problem with the truth. Throughout his campaign, he has openly lied about his previous positions, his beliefs, and the records of his opponents, Republican or otherwise. In a speech today on economic freedom at the University of Chicago, Romney continued the trend, building a mostly substanceless case against President Obama on the basis of half-truths and falsehoods. You can read the whole speech if you’d like. For now, I’d like to highlight a few passages that sum up Romney’s case against Obama in fact-free aplomb. First, there’s this:
For three years, President Obama has expanded government instead of empowering the American people. He’s put us deeper in debt. He’s slowed the recovery and harmed our economy.
There are a few things missing from this account. First is the fact that the Great Recession began in 2008 and was already on its way to reach its nadir by the time Obama took office. By the time the stimulus began to take effect, the economy was well on its way to the bottom, and independent analyses agree that the administration’s policies kept the country out of a depression, even if it wasn’t enough to juice the recovery.
What’s more, neither the stimulus nor the administration’s later policies were responsible for the deficit explosion of 2009 and 2010. The recession—and the drastically reduced tax revenues it produced—was responsible for a good portion of the deficit. The rest was the result of Bush-era policies like tax cuts and the wars in Iraq and Afghanistan. As economist Mark Thomas points out, government spending under Obama has increased at a lower rate than under Reagan, George H.W. Bush, or George W. Bush. The only president to have a lower rate of spending was, you guessed it, Bill Clinton.
On to the next passage, which is brazen in its disregard for the truth:
President Obama has proposed raising the marginal tax rate from 35% to 40%. He has proposed special breaks for his favorite industries, further increases for businesses he dislikes, and endless credits and subsidies intended to shape our behavior in this society. […]
If you invest your savings in a new business and are one of the fortunate few who see success – and make a profit – President Obama wants to take 40% of it.
President Obama wants to restore marginal tax rates on the rich to where they were before George W. Bush took office. While the American public might not understand marginal tax rates, it’s almost certainly true that Mitt Romney has a handle on the concept. Which means that the former Massachusetts governor is lying to his audience when he says that “President Obama wants to take 40 percent” of your income. An increase in marginal tax rates, or even a millionaire’s surtax, would only apply to income over a certain point. If the Bush tax cuts were repealed, and the top marginal rate went up to Clinton-era levels for income over $250,000, then it’s only the $250,001st dollar that would be affected.
Beyond that, the claim that Obama has proposed tax increases for “businesses he dislikes” only makes sense if you include policies designed to lower rates and broaden the tax base. “You could portray the president’s call to remove subsidies for oil and gas companies that way, and also his call to end the carried-interest loophole, which benefits hedge funds and investment companies,” says Michael Linden, director for tax and budget policy at the Center for American Progress. You might disagree with those policies, but Obama isn’t playing favoritism.
On that note, here is how Romney concludes his speech:
But, now, after spending three years attacking business, President Obama hopes to erase his record with a speech. In a recent address, he said that, “We are inventors. We are builders. We are makers of things. We are Thomas Edison. We are the Wright Brothers. We are Bill Gates. We are Steve Jobs.”
The only thing that’s true here are the quotes from Obama. The rest? False. Here are some excerpts from speeches the president has given over the last three years (all emphasis mine).
All across America, even today, on a Saturday, millions of Americans are hard at work. … They are the more than half of all Americans who work at a small business or own a small business. And they embody the spirit of possibility, the relentless work ethic, and the hope for something better that is at the heart of the American Dream.
Government can’t guarantee success, but it can knock down barriers that keep entrepreneurs from opening or expanding. […] This is as American as apple pie. Small businesses are the backbone of our economy. They are central to our identity as a nation. They are going to lead this recovery. The folks standing beside me are going to lead this recovery.
As part of the bipartisan tax deal we negotiated, with the support of the Chamber, businesses can immediately expense 100 percent of their capital investments. And as all of you know, it’s investments made now that will pay off as the economy rebounds. And as you hire, you know that more Americans working will mean more sales for your companies. It will mean more demand for your products and services. It will mean higher profits for your companies. We can create a virtuous circle.
[I]f you’re an American manufacturer, you should get a bigger tax cut. If you’re a high-tech manufacturer, we should double the tax deduction you get for making your products here. And if you want to relocate in a community that was hit hard when a factory left town, you should get help financing a new plant, equipment, or training for new workers.
The point is simply to say that the only Barack Obama who has spent his presidency criticizing business is the Barack Obama that exists in Mitt Romney’s head. Indeed, the same goes for this speech, and his entire campaign—Romney is running against policies that haven’t happened and an Obama that doesn’t exist. Exaggeration is normal in politics, but this goes beyond garden-variety embellishment—Romney’s speech, along with much of his rhetoric, is a remarkable work of staggering dishonesty. So far, he hasn’t really suffered for it.
By: Jamie Bouie, The American Prospect, March 19. 2012
“Not As Radical But Just As Ridiculous”: Mitt Romney’s Tax-Plan Flim-Flam
Well, it was about perfect, wasn’t it, that Mitt Romney gave his big economic speech before about 1,200 supporters in a 65,000-seat football stadium? Whether the stadium or the speech was emptier is the obvious question of the moment. Pathetic as the pictures of the event were, I’d have to hand the trophy to the speech. Some of Romney’s specifics weren’t as far out there as those of his opponents. His proposed individual marginal tax rates, for example, are radical, but not as radical as those announced by the remaining three other Republican candidates. But his plan is even worse than theirs are in a way that we’ve come to know as typically Romneyesque. He is desperately eager to please the right wing and also to try to seem like the responsible one, but there is no way to do both of things without lying.
First, though, let’s discuss that venue. So a hotel ballroom was oversubscribed. Okay, I know Detroit has been down on its luck for the better part of 40 years, but even so I find it pretty difficult to believe that there is not a venue in the whole metropolitan area that has a capacity somewhere in between the Westin Book Cadillac ballroom’s 1,000 or whatever and Ford Field’s 65,000 (for football; 80,000 for wrestling). The University of Detroit’s basketball teams, for example, must play somewhere. Reports indicate that the Economic Club of Detroit, not the campaign, made the switch. But someone at the campaign said, “Gee, okay!” It’s not a catastrophe, but it is staggeringly stupid. Imagine the field day the right-wing agitprop machine would have had in 2008 with Barack Obama doing something like that. Indeed remember the sport they made of the mere fact of Obama giving a speech in a football stadium, even after he did in fact fill it.
But the deception involved in trying to make 1,200 supporters seem like 80,000 is nothing next to the deception of the plan itself. Romney would lower all six current individual tax brackets by 20 percent. That’s not as drastic as his opponents’ plans. Newt Gingrich, for example, would let any taxpayer choose between paying under the current regime or just paying a 15 percent flat tax. Rick Santorum would have most taxpayers paying just 10 percent. So this is the Romney-the-Reasonable part of the plan. Sticking with six brackets is supposedly meant to signal that he believes in a little stability and is not a loon.
Reducing those rates, of course—along with the reduction of the corporate rate from 35 percent to 25 percent; along with massively increasing Pentagon spending—will reduce revenue. And here’s the catch, via The Wall Street Journal’s write-up. Romney “said Wednesday that as president, he would direct Congress to make up lost revenue from the rate cuts by limiting deductions, mostly for wealthier Americans. Mr. Romney and his aides didn’t say which deductions would be targeted.”
Ah! There it is. Deductions? We’ll figure those out later. Listen, I have a new fiscal plan for the Tomasky household that I am announcing today. I’m going to go half-time at the Beast and quit doing all my other work, thereby reducing my income by well more than half. But circumstances dictate that I also need to buy a new car, and a nice car, a Lexus, because this household needs a husband/father who isn’t ashamed to be a Tomasky and is prepared for the future because the roads can get awfully dangerous out there in Montgomery County. How will I pay for it, you ask? Well, first of all, you’re a freedom-hater for even asking the question, and second, I’ll simply cut all other household spending to the bone. I’ll end up revenue neutral, I swear.
Romney’s plan is literally about that serious. He won’t announce which deductions because it’s really hard to go after deductions, and because there is probably not enough money there anyway to make up for the lost revenue. But trust him, it’ll all work out.
And here’s a curious thing. Romney commits a grave error, from the right-wing point of view, in even acknowledging that there is lost revenue. If he’d gone to the Mitch McConnell School of Economics he’d know that cutting tax rates increases revenue. So the really interesting question here is: Why does Romney even bother to acknowledge that there will be lost revenue that will need to be made up?
He acknowledges it because some small but quickly vaporizing part of the man still retains some attenuated grasp of fiscal reality. So rather than tell the balls-out, red-meat lie that reduced rates will raise more revenue, he tells the squishy and weasely lie that he’ll take care of the imbalance at a future unspecified date in some future unspecified way. And that, my friends, is Romney to the core. He thinks he can finesse everything, that he’s much cleverer than he is, that somehow people won’t notice. But no one’s buying his line about the bailout. It’s patent nonsense, and Steve Rattner just demolished it on the Times op-ed page today. Romney also looks a little graceless, by the way, saying that he drives the Mustang and the GM pickup, while his wife drives the Cadillacs, plural. The way he added that after a pause, it reminded me of John McCain not remembering how many houses he owned. But Romney remembers. He just thinks he can bluff it.
He makes me really wonder about the private sector in this country. Did he earn all those millions behaving this way, telling people what they wanted to hear, then maybe doing something else entirely, then saying to them that that was his plan all along, then jovially throwing a colleague under the bus? Don’t answer that question.
By: Michael Tomasky, The Daily Beast, February 25, 2012
“Primary Pander Mode”: Severely Conservative Mitt To Rollout New Tax Plan
What do Republican politicians do when they need to pick it up a step? You’ve got it: they propose more tax cuts.
So it’s no great surprise that Mitt Romney is signaling that he’s coming out with a new, “bold” tax proposal to coincide with his stretch drive towards primaries next week in Michigan and Arizona, not to mention the upcoming Super Tuesday (March 6).
The chosen herald for this news appears to be that intrepid supply-sider, Larry Kudlow of National Review, who reports, with barely restrained excitement, that Mitt’s new tax cuts will be “across-the-board with supply-side incentives from rate reduction, and that it will help small-business owners as well as everyone else.”
You may wonder why Romney didn’t find space for this stuff in his previously released 159-page economic plan. Looking at that beast for the first time in a while, it already includes making the Bush tax cuts permanent; abolishing estate taxes; a partial abolition of taxes on interest, dividends and capital gains; and lower corporate tax rates. Ah, but there it is, the placeholder for new goodies: “a conservative overhaul of the tax system over the long term that includes lower, flatter rates on a broader base.”
Now lots of folks in both parties think it might be possible to have lower income tax rates if the lost revenues are offset by aggressive elimination of tax expenditures, from fossil fuel subsidies to the mortgage interest deduction, all of them zealously defended by some powerful lobby. It will be interesting to see if Romney moves in that direction, or instead (as one might guess from Kudlow’s enthusiasm) relies on the old voodoo magic of supply-side economics, and pretends lower rates will pay for themselves. Since he’s in full primary pander mode, it’s unlikely he’ll propose anything a signfiicant number of GOP primary voters will find objectionable.
By: Ed Kilgore, Washington Monthly Political Animal, February 21, 2012
Buffett Rule Will Raise $50 Billion Per Year, Affect Just 0.08 Percent Of Taxpayers
When President Obama announced his latest vision for the so called “Buffett rule” — a 30 percent minimum tax on millionaires — during his State of the Union address this week, Republicans were quick to criticize it. For instance, Speaker of the House John Boehner (R-OH) derided the proposal as a “political gimmick.” “It’s a smokescreen,” added Rep. Steve Scalise (R-LA).
However, as a new analysis from Citizens for Tax Justice pointed out, the Buffett rule as laid out in the speech could raise up to $50 billion per year to pay down the deficit, while affecting just 0.08 percent of taxpayers:
Citizens for Tax Justice has calculated that President Obama’s “Buffett Rule” would, if in effect this year, raise $50 billion in a single year and affect only the richest 0.08 percent of taxpayers— that’s just eight percent of the richest one percent of taxpayers. […]
To calculate the $50 billion figure, we assumed that there would be a minimum tax that applies to adjusted gross income (AGI) minus charitable deductions. (We’ll call this modified AGI.)
We assumed that a taxpayer with modified AGI greater than $1 million would face a minimum tax of 30 percent of modified AGI. The taxpayer would pay whichever is greater, their personal income tax under the existing rules or this minimum tax.
Obviously, $50 billion by itself won’t balance the budget, but it certainly doesn’t hurt. At the same time, the Buffett rule will aid in correcting some of the problems in the tax code — like one quarter of millionaires paying lower rates than millions of middle class families and some millionaires paying no income tax at all — that have helped drive income inequality up to a level not seen in the U.S. since the 1920s.
By: Pat Garofalo, Think Progress, January 27, 2012
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