“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
“Logic, Fairness, And Common Sense”: The Final Days, The Biggest Issue, And The Clearest Choice
As we go into the final days of a dismal presidential campaign where too many issues have been fudged or eluded — and the media only want to talk about is who’s up and who’s down — the biggest issue on which the candidates have given us the clearest choice is whether the rich should pay more in taxes.
President Obama says emphatically yes. He proposes ending the Bush tax cut for people earning more than $250,000 a year, and requiring that the richest 1 percent pay no less than a third of their income in taxes, the so-called “Buffett Rule.”
Mitt Romney says emphatically no. He proposes cutting tax rates on the rich by 20 percent, extending the Bush tax cut for the wealthy, and reducing or eliminating taxes on dividends and capital gains.
Romney says he’ll close loopholes and eliminate deductions used by the rich so that their share of total taxes remains the same as it is now, although he refuses to specify what loopholes or deductions. But even if we take him at his word, under no circumstances would he increase the amount of taxes they pay.
Obama is right.
America faces a huge budget deficit. And just about everyone who’s looked at how to reduce it — the non-partisan Congressional Budget Office, the bi-partisan Simpson-Bowles Commission, and almost all independent economists and analysts — have come up with some combination of spending cuts and tax increases that raise revenue.
Just last Thursday, executives of more than eighty large American corporations called for tax reform that “raises revenues and reduces the deficit.”
The practical question is who pays for those additional revenues. If Romney’s view prevails and the rich don’t pay more, everyone else has to.
That’s nonsensical. The rich are far richer than they used to be, while most of the rest of us are poorer. The latest data show the top 1 percent garnering 93 percent of all the gains from the recovery so far. But median family income is 8 percent lower than it was in 2000, adjusted for inflation.
The gap has been widening for three decades. Since 1980 the top 1 percent has doubled its share of the nation’s total income — from 10 percent to 20 percent. The share of the top one-tenth of 1 percent has tripled. The share of the top-most one-one hundredth of 1 percent — 16,000 families — has quadrupled. The richest 400 Americans now have more wealth than the bottom 150 million of us put together.
Meanwhile, the tax rates paid by the wealthy have dropped precipitously. Before 1981 the top marginal tax rate was never lower than 70 percent. Under President Dwight Eisenhower it was 93 percent. Even after taking all the deductions and tax credits available to them, the rich paid around 54 percent.
The top tax rate is now only 35 percent and the tax on capital gains (increases in the value of investments) is only 15 percent. Since so much of what they earn is from capital gains, many of the super-rich, like Mitt Romney himself, pay 14 percent or less. That’s a lower tax rate than many middle-class Americans pay.
In fact, if you add up all the taxes paid — not just on income and capital gains but also payroll taxes (which don’t apply to income above incomes of $110,100), and sales taxes — most of us are paying a higher percent of our income in taxes than are those at the top.
So how can anyone argue against raising taxes on the rich? Easy. They say it will slow the economy because the rich are “job creators.”
In the immortal words of Joe Biden, that’s malarky.
The economy did just fine during the three decades after World War II, when the top tax rate never fell below 70 percent. Average yearly economic growth was higher in those years than it’s been since, when taxes on the rich have been far lower.
Bill Clinton raised taxes on the rich and the economy did wonderfully well. George W. Bush cut them and the economy slowed.
The real job creators are America’s vast middle class, whose spending encourages businesses to expand and hire — and whose lack of spending has the opposite effect.
That’s why the recovery has been painfully slow. So much income and wealth have gone to the top that the vast majority of Americans in the middle don’t have the purchasing power to get the economy moving again. The rich save most of what they earn, and their savings go anywhere around the world where they can get the highest return.
It would be insane to compound the damage by raising taxes on the middle class and not on the rich.
Logic, fairness, and common sense dictate that the rich pay more in taxes. It’s the key to avoiding January’s fiscal cliff and coming up with a “grand bargain” on taming the budget deficit. And it’s central to getting the economy back on track.
By: Robert Reich, Robert Reich Blog, October 28, 2012
“Specifics Please”: Joe Biden Calls Paul Ryan Out On Repeated Falsehoods
What a difference a week makes. In the first presidential debate, President Obama let Mitt Romney’s attacks on him stand, and seemed disengaged. Vice President Joe Biden stayed in Rep. Paul Ryan’s face for the entirety of Thursday’s vice presidential debate. In the process, he forced Ryan, and by extension the Romney campaign, onto the defensive for a large part of the evening. Obama has a lot to be grateful for.
Last week, Romney repeated over and over that the president’s health care bill cut $716 billion. Obama didn’t push back much to explain that the cuts came from providers and insurance companies, not beneficiaries. This week, Ryan was forced again and again to answer for his voucher/”premium support” approach to Medicare, which Biden hammered at relentlessly.
Last week, Romney flatly denied he had proposed $5 trillion in tax cuts. This week, Ryan had to keep dodging the question of what middle-class deductions would have to be eliminated to pay for the tax cuts. The moderator, Martha Raddatz, who effectively challenged both candidates throughout the debate, at one point turned to Ryan and asked: “No specifics again?” The discussion revived an issue Obama badly needs in play.
And Ryan made a major mistake in defending his past support for privatizing Social Security. Last week, Obama made a mistake of his own when he said that his position and Romney’s on Social Security were similar, thereby closing off a matter that has always been a Democratic staple. The Republicans should have let things sit right there. Instead, Ryan brought the privatization issue to life. His standing his ground on his Social Security ideas (rather than simply saying that Romney had no plans to move in that direction) will allow the Democrats to add Social Security to Medicare in their arsenal of issues they hope to use to cut Republican margins among seniors.
Biden was hot, avuncular, occasionally sarcastic, and always engaged. He laughed a lot, and never let a point slip. I am certain that the cheers in Democratic living rooms around the country were as loud as the sighs of relief. That alone was vital to Obama. Demoralized Democrats themselves contributed to the story line of Obama’s failure in the first debate. The days of demoralization are over.
Some will no doubt write that Biden was too hot and overreacted to Obama’s disengagement. But this misreads the net impact of the debate, which was to renew the doubts about Romney, Ryan and their approach that were hurting the GOP before the last debate. Biden stayed on Romney’s class bias from the beginning to the end — he was not shy, as Obama was, about mentioning Romney’s 47 percent comments. A Romney presidency, Biden said, would concentrate on “taking care only of the very wealthy.”
Ryan probably did himself some good with his conservative base, and he generally preserved his cheerful demeanor. The debate will help advance his chances for a 2016 Republican nomination if the Romney-Ryan ticket loses this year. But his main tasks on Romney’s behalf were to keep the momentum from last week’s debate going and to keep the campaign colloquy focused on Obama’s weaknesses. In this, he failed. The news is likely to shift again toward the problems with Romney’s ideas, and with Ryan’s own. A particularly revealing moment was Ryan’s heartfelt defense of his staunch opposition to abortion. It was an honest answer that will keep him in good stead with conservatives, but it almost certainly hurt Romney, who has been trying to soften his stance on the subject.
In 2004, after John Kerry’s clear victory over George W. Bush in the first presidential debate, then-Vice President Dick Cheney came out on top in most of the commentary about his encounter with John Edwards. Cheney thereby slowed Kerry’s momentum. Dick Cheney has never been Joe Biden’s role model, but Biden’s imperative Thursday night was the same as Cheney’s eight years ago. And with a very different style, he achieved the same result. It will now be Obama’s task to pick up where Biden left off, but the vice president clearly brought his president back to a much better place.
By: E. J. Dionne, Jr., The National Memo, October 12, 2012
“Campaigns Are Like Decathlons”: Romney’s Debate Performance Will Light Fire Under Obama Supporters
A mutual friend told me in 2007 that Barack Obama believed campaigns are more like decathlons than single event contests. In this scenario a candidate doesn’t have to win every event, but has to do well enough for their strong performances to carry them over the top. If that is true Barack Obama did fine in his first presidential debate with Mitt Romney, but he didn’t win. In the long run Romney’s strong performance may be just what Democratic troops need to light a fire under them to volunteer even more for campaign field efforts where the Obama campaign is surely superior.
The president seemed overcoached in his first debate. Maybe the instruction was to stay warm, communicate the facts, and keep from letting any disdain for Romney seep through. If so, that worked, but Barack Obama didn’t give the audience enough energy. He let opportunities to challenge Romney slide by. At one point Romney claimed to be unaware of tax advantages for offshoring plants and lamented not knowing about them. “Maybe I need a better accountant,” he said. That was a great opportunity for President Obama to talk about Romney’s business record offshoring jobs or tax strategies. The president looked at his opponent with a knowing smile as if he knew there was fresh meat on the ground but chose not to pounce.
Despite Mitt Romney lying about his economic plans, the Republican will get a second look from voters this week. Romney was aggressive and he needed to be. Donors who were looking for the exits will probably settle back down. The media loves a horse race, and Romney just excited the Fourth Estate too. Good for him, but maybe good for Democrats too.
As polls got better recently, the whiff of overconfidence began to seep into Democratic groupthink. I plead guilty myself. For Democratic activists who spend a lot of time reading favorable articles about the president and watching TV shows that tend to take his side discounting Mitt Romney was becoming a favorite past time. Romney’s awkwardness and mistakes made it easy. But the likelihood of a Democratic blowout is remote. The demographic and ideological math just doesn’t support it. Democrats will have to gut out this Election Day with sweat and shoe leather just like the last one and the scare we got last night probably helps more than it hurts.
By: Jamal Simmons, U.S. News and World Report, Debate Club, October 4, 2012
“Where’s The Data?”: Paul Ryan Claims 30 Percent Of America Happy To Freeload
One of the more enduring ‘knocks’ on the candidacy of Mitt Romney is that he incorrectly views many of those who are in need of government provided assistance as being people who prefer to live life at the expense of the taxpayer rather than pursue a more meaningful existence of hard work and self-sufficiency.
Whether this perspective on Romney is fair or unfair, most would agree that the GOP standard bearer’s now infamous 47% speech—delivered at a Boca Raton fundraiser—has done little to dispel this meme as we head in to the dwindling days of the 2012 presidential campaign.
Now, Romney’s running mate, Congressman Paul Ryan, has weighed in with his own assessment of what drives a significant portion of the American public—and it’s not pretty.
Speaking at the annual American Spectator Robert L. Bartley Gala Dinner in November of 2011, Ryan had this to say-
“Today, 70 percent of Americans get more benefits from the federal government in dollar value than they pay back in taxes. So you could argue that we’re already past that [moral] tipping point. The good news is survey after survey, poll after poll, still shows that we are a center-right 70-30 country. Seventy percent of Americans want the American dream. They believe in the American idea. Only 30 percent want their welfare state. What that tells us is at least half of those people who are currently in that category are there not of their wish or their will.”
While it is certainly interesting that Ryan predicates his remarks on the belief that one who does not self-identify as “right of center” necessarily opposes the the American dream, leaving it to follow that such an individual would prefer to allow the government to pay for his or her existence (quite a stretch by any reasonable standard), what most interested me about Ryan’s address was the source for his assumptions.
Who says that America is a center-right nation by a 70-30 margin? And if that is the basis of Ryan’s calculations in determining how many of us prefer the welfare state to hard work, wouldn’t a source for such a claim be appropriate?
As I simply could not recall there being any such ‘survey after survey’ and ‘poll after poll’ that would support Congressman Ryan’s conclusions, it struck me as a worthwhile venture to go looking for the same.
Bearing in mind that the Ryan address was given November of 2011—and wanting to be fair to Congressman Ryan—I went off in search of any poll conducted within a reasonable window of the time frame of Ryan’s address that might support his allegations.
I found that virtually every single one of the major polls conducted in the nation during the months leading up to Ryan’s speech revealed that the overwhelming majority of Americans (64.5 percent when the polls are averaged) believed we should be raising taxes to help cut into the deficit—an odd conclusion in a nation so heavily slanted to the right of center as claimed by Mr. Ryan.
I found that the Gallup Poll conducted on September 20th of 2011 revealed that 70% of Americans wanted to increase taxes on corporations by eliminating certain tax deductions the public believed to be unfair. The same poll also discovered that Americans widely supported the jobs plan that President Obama sent to Congress where it failed thanks to Congressman Ryan and his cohorts.
Again, a shocking result if we are to believe Ryan’s assessment that seven out of ten Americans are committed to the very ideology that Ryan professes to be his own.
I found a CBS/New York Times poll conducted just a few months before Ryan’s speech reporting that 72 percent of those polled disapproved of the way his party handled the default crisis.
And in a Time Magazine poll conducted less than one month before Ryan’s labeling 30 percent of our fellow Americans to be a bunch of bums, 79 percent of the public believed that the gap between the rich and the poor had grown too large, 86 percent believed that Wall Street and its lobbyists have far too much to say about what happens in Washington and a majority of Americans supported the Occupy Wall Street movement.
Do you know what I could not find?
Not so much as one survey or poll suggesting that the United States is a right-of–center electorate by a margin of 70-30 or that 30 percent of the public is content to live their lives courtesy of the United States government with no interest or desire in taking control of their own support and sustenance if given the chance.
While it might not be forgivable, it would at least be understandable had Ryan made this speech in the heat of a campaign where he has proven himself willing to say or do just about anything to solidify his base. However, these comments were made well before Congressman Ryan was chosen for the GOP ticket. Thus, it seems reasonable to accept that this is either what Mr. Ryan believes or what he thinks he can sell—despite an apparent lack of any evidence whatsoever to support so shrill and offensive a claim.
Congressman Ryan owes us some authority for his remarks. If these polls and surveys exist, his campaign should make them available to us.
Otherwise, Paul Ryan—a man whose own living has long come solely at the expense of the American taxpayer—is simply making this stuff up out of whole cloth and, in the process, deeply offending the millions of Americans who want more than anything to find work and get ahead but are struggling to do so.
Talk about being out of touch….
By: Rick Ungar, Contributor, Forbes, October 3, 2012
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