“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
“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
“Severe Stonewalling”: Can Mitt Romney Hide His Taxes Forever?
Add Brit Hume to the growing list of prominent conservative voices suggesting that Mitt Romney release more than just two years of tax returns.
“Anytime it’s disclosure versus nondisclosure, you always wonder whether it isn’t better just to put it out there,” he said on Bill O’Reilly’s Fox News show last night.
Hume’s comment came a few hours after Haley Barbour used an interview with ABC News to reiterate his call for Romney to put out more tax records. “The advice I would give Romney is, Who cares about your tax returns?” Barbour said. “Release ‘em! We need for this campaign to be about Obama’s record.”
Other conservatives who have offered similar advice include George Will, who said on Sunday that the Romney campaign is “losing in a big way” on the topic, Bill Kristol, and Alabama Gov. Robert Bentley.
So far, Romney has released his returns from 2010 and an estimate for 2011, with a promise that he will release that year’s full return when it’s completed. But he’s drawn a line at putting out information for any other years. This is causing him two problems. The first is with the Obama campaign, which is jumping at the chance to paint Romney as a man with something to hide. Today, for instance, Obama’s team launched this ad: http://youtu.be/uMo5pykT4uw
The bigger problem for Romney, though, is that the media has also latched on to the story, pressing him to explain why he won’t release more and exploring all of the possible reasons he might be reluctant to share his past returns – especially the possibility that his effective tax rate might have been at or close to zero in some recent years.
Romney and his team haven’t helped themselves by offering bogus precedents for a presidential candidate releasing so little tax information, a response that has only encouraged the media to push harder. A measure of how big the story has become to the nonpartisan press came last night, when CNN’s Erin Burnett abandoned her neutral pose and excoriated Romney for not coming clean.
It’s hard to believe Romney can ride out the next four months without offering up some additional records. Of course, as Joan Walsh noted yesterday, it’s possible the returns Romney is now sitting on contain information that would be more damaging than what he’s now enduring. Then again, what little tax information Romney has released already reveal investments in Swiss bank accounts and offshore havens and an effective tax rate of just 13.9 percent. So the image of him as an extravagantly rich man who benefits from a tax system that’s skewed toward the investor class is already established. Assuming he’s done nothing illegal (surely the IRS would have taken notice if he had), would it really be that much worse for Romney if documents came out showing he paid an even lower effective rate in some years?
Maybe the calendar offers a clue about Romney’s thinking. In just over a week, the London Olympics will kick off. If you’re going to release more embarrassing tax returns, maybe that would be the ideal time?
By: Steve Kornacki, Salon, July 17, 2012
“The Job Creator”: Repeat After Me, Mitt Romney Doesn’t Care About Jobs
If you’re running a campaign against an incumbent president when the economy’s persistently sluggish and unemployment is over 8%, you are naturally going to harp on said president’s failure to create more jobs. This is true even if you are the nominee of the Jewish Anti-Abortion Isolationist Foodie Party (just to make something up), and really just care about “your issues.”
As it happens, Mitt Romney is the nominee of a party whose activist base and elite opinion-leaders alike mainly care about relieving businesses and the wealthy from taxes and regulations, paring back or eliminating the New Deal/Great Society social safety net (along with resisting extensions of it like the Affordable Care Act), and reversing most of the cultural trends of the late twentieth century. Do they think their agenda will generally produce a stronger society and economy, making Americans healthier, wealthier and wiser? Probably, though the “constitutional” wing of the conservative movement tends to treat small government, laissez-faire capitalism, and a patriarchal culture as having been divinely ordained via the Declaration of Independence, and thus as normative regardless of the practical consequences. Would they think that regardless of the current GDP and employment statistics? You betcha, because they were advancing much the same agenda during the late 1990s and throughout the 2000s. Would they support the same agenda if the federal budget were balanced? Absolutely, as we know from their argument prior to enactment of the Bush tax cuts that the federal government was in danger of running surpluses so large that it would have to start buying up assets to soak up the excess revenues.
I mention these familiar if oft-forgotten facts by way of presenting this snippet at The Hill from recent conservative semi-apostate Juan Williams, who is wondering what the Mitt Romney’s actual agenda might be to boost employment:
[F]ixing the economy is the entire basis of Romney’s campaign. So what plans does the GOP candidate have to rev up the economy?
His best-known idea is cutting taxes. But there is no way to specify how many jobs that will create. After-tax profits for corporations are already high.
His most concrete idea for creating jobs is to approve construction of the Keystone XL oil pipeline from Canada to the Gulf of Mexico. The idea has political potency because President Obama, citing environmental concerns, denied a permit for TransCanada Corp. to construct the 1,700-mile pipeline.
However, the number of jobs that would be created by Keystone could generously be described as modest.
That number, according to a study Williams cites, is 1,400. He also goes on to report that less than half of Republicans think Romney has an actual plan for the economy.
While the search for a Romney/GOP “jobs plan” is, to put it mildly, elusive, they do have very concrete ideas for reshaping the tax code and the federal government. It’s called the Ryan Budget, and whatever its long-term effect via the alleged moral tonic to the poor and the liberating impact on “job creators,” the most immediate and by far the most certain consequences for jobs are negative. I mean, you may rhetorically say that public-sector jobs aren’t “real” or “good” or that they pay too much, but they are jobs, not turnips. Combined with the restrictive monetary policies virtually all Republicans favor these days, the short-term prognosis for Republican rule is higher, not lower, unemployment.
By: Ed Kilgore, Contributing Writer, Washington Monthly Political Animal, July 17, 2012
“No Discernable Vision”: Knowing How The Economy Works Is Not Enough
This week will see the release of The 4% Solution: Unleashing the Economic Growth America Needs, a collection of essays from the George W. Bush Institute with a forward by the former president himself. It’s true that annual GDP growth never actually reached 4 percent during Bush’s two terms in office and averaged only 2.4 percent even if we generously exclude the disastrous year of 2008. But look at it this way: Who knows more about what the president ought to do about the economy than Dubya does? After all, there’s only one living American (Bill Clinton) with as much experience being president, so Bush must have the answers we need.
A ridiculous argument? Of course. That’s because experience only gets you so far. It’s obviously a good thing, all else being equal, for the president to know a lot about the economy, just as it’s a good thing for him to know a lot about foreign affairs or domestic policy. But the truth is that although the government has to solve many practical problems, and it’s important to have smart, knowledgeable people in government to work on them, the presidency is not a technocratic position.
For a long time, Republicans grasped this much better than their opponents. It was the Democrats who seemed to prize experience and knowledge, looking admiringly at candidates who understood how government works and could be counted on to manage the problem-solving efforts that would be required, while Republicans favored candidates like Ronald Reagan and George W. Bush, who argued that vision was more important than skills. Yet this year, Republicans have nominated a candidate with no discernible vision whose candidacy is based almost entirely on the knowledge and management experience he supposedly gained in business.
It’s odd that for someone whose argument is so much about his preparation and experience, Mitt Romney barely ever mentions the one job he held that actually resembles being president—the governorship of Massachusetts. But we’ve had former governors who made excellent presidents and former governors who made terrible ones. And the brevity of Barack Obama’s tenure in the Senate didn’t stop him from amassing what was arguably the most impressive string of legislative victories in half a century during his first two years in office.
Mitt Romney barely bothers to persuade the voters that he will be able to get things done in Congress or that he understands foreign policy. Instead, the phrase he repeats over and over on the campaign trail is “I know how the economy works.” The current arguments over Bain Capital notwithstanding, this has been the basic rationale for Romney’s candidacy, that during his time in business he gained a body of knowledge and a unique insight that will allow him, as president, to make dramatic improvements in the economy. During the primaries he argued that this experience would make him a better president than his Republican opponents, and today he argues that it would make him a better president than Barack Obama.
But if there were a magic key to unlock spectacular growth and widely shared prosperity, you’d think we would have found it by now. There hasn’t been a president in decades, the current one included, who didn’t have lots of businesspeople working in his administration. And Barack Obama talks to corporate leaders all the time. If Romney knows something they don’t, he hasn’t told us what it is. If you read through his economic plan, you’ll find that it contains the same things Republicans always advocate: lower taxes, reduced regulations, free trade, and so on. You’ve certainly heard Romney say that his business experience helps him understand the economy. But have you ever heard him say what exactly he learned that no one else knows?
Perhaps he plans to unveil this remarkable insight once the election is over; if so, one can hope that as a patriotic American he’ll share it with the country even if he loses. Because even if it involved some policies that conservatives like, you can bet that President Obama would be happy to take the bargain if it would deliver something like the sustained 4 percent growth George W. Bush promises. If you really could create a humming economy just by cutting taxes for the wealthy and creating some “Reagan Economic Zones” (yes, that’s something Romney proposes, though he doesn’t say much about what it means), Obama would do it. The reason he doesn’t isn’t that he’s a socialist; it’s that the argument isn’t all that persuasive.
So no, Mitt Romney is not in possession of a secret that can deliver us to economic nirvana. We can try to determine whether anything less than admirable happened at Bain Capital during Romney’s time there, and if so how much responsibility he bears. But even if all those questions are answered in Romney’s favor, it wouldn’t change the fact that the policies he advocates are derived not from his experience but from his politics and his moral perspective, just as Barack Obama’s are.
I’m not sure if Romney actually believes that keeping taxes for the wealthy as low as possible and scaling back regulations really does bring prosperity for all. But if he does, it isn’t because he concluded that after a careful examination of the evidence (if that were the case, the last decade would have been the most prosperous in American history). He favors those policies because that’s what his party believes and because they reflect his values. Romney may “know how the economy works” in certain ways. But that knowledge isn’t enough.
By: Paul Waldman, Contributing Editor, The American Prospect, July 17, 2012
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