As reported by Bloomberg, TheNew York Times, Boston
Globe,Washington Post and other reputable news services, on
August 23, 2012, Willard Mitt Romney told a group of wealthy donors, "Big
business is doing fine ... They know how to find ways to get through the tax
code [and] save money by putting various things in the places where there are low tax havens around the world for their businesses."
Romney, who has been accused of sheltering up to $100 million of his own money
in Cayman Island "IRAs," obviously sees avoiding taxes as a good thing, at least
when speaking to his rich cronies and benefactors. But this presents a huge
problem for the 99% of Americans who are forced to pay taxes, rain or shine,
through automatic payroll deductions, since we end up paying the taxes of the
wealthiest Americans and corporations while they laugh to their Cayman Island
banks. Even worse, if Romney is elected president, he plans to reduce the taxes
of the wealthiest 1% to less than 1%, by eliminating income taxes on the main
sources of their income: capital gains, interest and dividends. If the
Romney-Ryan budget plan had been in effect, Romney would have paid federal
income tax of less than 1% on his 2010 income of $21 million. Who is going to
make up the difference? Obviously, we the little people. Experts have calculated
that when Romney cuts his taxes to almost nothing, each average American's taxes
will go up by around $2,000.
So when Romney promises to "fix" our economy, what he really means that he is
going to geld everyone who isn't super-rich, like himself.
Meanwhile, the Wikileaks-like website Gawker has released more than 950 pages of
information about Romney's finances, which it calls a "black hole" full of
"tax-dodging tricks available to the hyper-rich." Gawker describes the net
effect of the documents as follows: "Together, they reveal the mind-numbing,
maze-like, and deeply opaque complexity with which Romney has handled his
wealth, the exotic tax-avoidance schemes available only to the preposterously
wealthy that benefit him, the unlikely (for a right-wing religious Mormon)
places that his money has ended up, and the deeply hypocritical distance between
his own criticisms of Obama's fiscal approach and his money managers' embrace of
those same policies. They also show that some of the investments that Romney has
always described as part of his retirement package at Bain weren't made until
years after he left the company." (When Romney wants to brag about his
accomplishments at Bain, he ran the whole show, but after Bain became
a pioneer of outsourcing American jobs to China, Romney "wasn't there"
even though his name appears over and over again as the CEO of Bain Capital,
years after he "left.")
The bottom line? Romney's comments above, his personal $100 million Cayman
Island "IRA" and his track record as a corporate raider, vulture capitalist and
outsourcer of American jobs speak for themselves. If he wants to prove me and
his other critics wrong, all he has to do is disclose how he and Bain made so
much money in non-parasitical ways. But he's not going to do that, because the
evidence would show that he is a rich, bloodsucking parasite. Immoral Aid?
As Hurricane Sandy threatens 50 million American with devastating floods, I am
reminded of Mitt Romney's statement that it is "immoral" to borrow money to help
flood victims. Romney, a former Mormon Bishop and therefore someone who should
presumably understand the term, didn't call it "immoral" for the federal
government to borrow billions to bail out the Olympic games, or his rich Wall
Street cronies. He obviously doesn't consider it "immoral" to borrow the better
part of $7 trillion dollars to rescue the super-rich and increase defense
spending for things the Pentagon hasn't even requested. According to Bishop
Romney, it seems the only people it's "immoral" to help are the
47% of Americans who need help the most, including flood victims, distressed
auto workers, and poor girls and women who need Planned Parenthood’s help with
contraceptives, family planning and preventive healthcare.
More Details Emerge in the New York Times
Here are excerpts from a New York Times article:
Buried deep in the tax returns released
by Mitt Romney’s presidential campaign are references to dozens of offshore holdings
with names like Ursa Funding (Luxembourg) and Sankaty Credit Opportunities
Investors (Offshore) IV, based in the Cayman Islands ... Elite investors like
Mr. Romney are able to increase their fortunes in ways unavailable to most
taxpayers ... Though headquartered in Boston, Bain and its credit affiliate,
Sankaty Advisors, have set up at least 137 entities in the Caymans, using local
lawyers and others who provide an islands address for paperwork purposes ...
Some might still assail the arrangements as “tax dodges.” Others, however, would
say they are simply efforts to make Bain’s funds more “tax efficient” [by
taking generous advantage of loopholes in the tax system] ... A variety of Bain funds in the Romneys’
portfolio have controlling stakes in foreign companies. Had those funds been set
up in the United States, the Romneys and other American investors would probably
have been subject to certain federal taxes for their ownership of “controlled
foreign corporations.” Setting up the funds in the Caymans allowed them to avoid
those taxes ... Individual retirement accounts, as tax-exempt entities, are
subject to the “unrelated business income” tax. But people familiar with Mr.
Romney’s investments said his I.R.A., which is managed by an independent trustee
and is estimated to be worth between $21 million and $102 million, used offshore
blockers [i.e., offshore shell corporations which process multi-million dollar
sales of companies, but end up with no assets] to avoid the tax. Mr. Romney’s
I.R.A., for instance, has millions invested in several Sankaty funds with
onshore and offshore investment vehicles. His I.R.A. would have invested through
the offshore funds, they said.
However, assuming that everything Mitt Romney did was within the letter and
spirit of the law, why wouldn't he just disclose his tax returns, saying, "Look,
the system is full of loopholes that are unfair to people who are extremely
wealthy, and since I understand the system and know
how to take advantage of it, I will work to fix the obvious problems"?
Unfortunately, Romney's history and things he's said in the past make it seem he
just doesn't think that way. He seems to actually favor the rich getting richer
at the expense of the poor- and middle-income classes. Rather than making the tax
system fairer, he wants to virtually eliminate federal income taxes on the
super-rich by exempting the main sources of their income: capital gains,
interest and dividends. Under such a system, most of the 1% will pay less than
1% in federal income taxes, including Romney himself, who would have paid .0082
on his income of $21 million in 2010.
The 13% Solution
When asked to disclose his tax returns, Mitt Romney replied, "I am not a
business." But he famously (or infamously) said that "corporations are people."
Unlike most Americans, who would say that human beings are more important than
corporations, Mr. Flip Flop seems to change his views the way Imelda Marcos
changed her shoes. One of the few times he is ever consistent about anything is
on the subject of his taxes. When the subject of his taxes comes up, he
consistently makes up excuses not to explain why he seems to be (perhaps) the
biggest tax dodger in American history.
Willard Mitt Romney claims that he paid at least
13% in taxes for the last decade, but was careful not to specify federal
income taxes. And did he pay 13% of everything he made or only
of the money that he didn't shelter from taxes? It seems obvious that Romney
has a LOT of money in Bermuda and Cayman Island tax
shelters. Major new services like the New York Times,
Wall Street Journal,TIME, Reuters and CBS News have
reported that he may have up to $100 million, or close to half his estimated net
worth, in hard-to-explain Caribbean investments. In
fact, it seems he may have placed entire
Bain Capital holdings in offshore "IRAs." So suppose Romney made $20 million one
year, sheltered $19.9 million in offshore "IRAs," then paid taxes on only
$100,000 in earnings? Yes, he might have paid 13% in taxes on the $100,000 and
that might be commensurate with what other Americans pay after deducting
personal exemptions, charitable contributions, etc. But his real
effective tax rate might be closer to 1.3%, or zero, depending on how much money
he made, and how much of that money was sheltered. The only way
for anyone to know Romney's real tax rate is for him to release his tax returns.
The fact that he refuses to release any of his
returns prior to 2010 suggests that there are major problems with his older
returns. Do we want a commander-in-chief who expects American soldiers to risk
their lives in battle, when he's afraid to pay his fair share of taxes to help
provide them with the best possible equipment and training?
The proposed Romney-Ryan budget plan would eliminate taxes on interest,
dividends and capital gains, making it possible for millionaires and
billionaires to reduce their effective tax rates to 1% or less. (According to
Romney's 2010 tax return, under the new Romney-Ryan plan he would have paid slightly less than one percent on
$21 million in earnings.) In order to fund this lavish bounty for the
super-rich, less wealthy Americans will have to pay thousands more in taxes per
year. Then, finally, Willard Mitt Romney can legally avoid paying taxes, since
you and I will be covering for him!
Swimming with the Sharks
Corporations are people, my friend ... of course they are ... human beings, my
friend.—Mitt Romney
But as we all know, some corporations are more like cold-blooded sharks than warm-blooded
human beings ... especially private equity firms like Mitt Romney's rapacious team of
orca-like corporate raiders, Bain Capital.
Under Romney's direction, Bain loaded
companies like GST Steel and Dade International with massive debt in
order to pay Romney and other investors massive dividends, while the companies went
bankrupt and their workers became jobless. Now Romney, the consummate slick
pro-corporation politician, has raised large sums of campaign cash from Wall Street firms like
Goldman Sachs and Morgan Stanley because they know he'll scratch their backs by
letting them do what he did himself: profit from the elimination and outsourcing
of American jobs. Romney insists that "corporations are people"
and has called federal government spending to assist tornado and flood victims "simply immoral" because it increases the national budget deficit. But when has he
ever called government borrowing to fund wars and Wall Street bailouts "immoral"? Romney knows where his bread is
buttered, and who provides the rich cream. Like most Republican politicians
these days, he seems quite happy to let the commoners go without bread, as
long as his wealthy patrons and cronies can continue to have their cake and eat
it too.
In his book The Buyout of America: How Private Equity Is Destroying Jobs and
Killing the American Economy, Josh Kosman describes Bain as
"notorious for its failure to plow profits back into its businesses."
Bain was the first large private equity firm to derive a large percentage
of its revenues from corporate dividends and other investor-gratifying distributions. Companies
acquired by Bain sometimes borrowed large sums of money in order to increase their dividend
payments, ultimately leading to the collapse of what had been financially stable
businesses. According to Bloomberg, "Whether companies boomed or filed
for bankruptcy, the Boston-based firm found profits for Romney, its other
executives and investors ... Interviews with former employees and executives at
Bain and companies it controlled, along with a review of Bain’s activities
described in public documents and news accounts, paint a picture of an operation
that wasn’t focused on expanding employment. Instead, Bain’s mission, like [that
of] most
private equity firms, was to generate gains for its investors."
Dade International is a good example. Dade was combined by Bain with several
other companies, becoming Dade Behring. At least 1,600 employees were dismissed
from 1996 to 1999, according to SEC reports. Bain and Goldman Sachs sold
their Dade shares for $365.4 million, in addition to prior dividends and
other distributions, before the company went bankrupt.
According to Michael Rumbin, Dade's vice president of technology, "They
leveraged this thing to the hilt and got out when they could. We were left
holding the bag." Rumbin became one of Romney's and Bain's casualties when he too
lost his job. Now we know why private equity firms are better known as "corporate
raiders."
Like a reverse Robin Hood, Mitt Romney stole jobs from the poor to give
dividends to the rich. Now he seems intent on sending
American citizens to the poorhouse, en masse. He recently earned the sobriquet "Romney Hood" after the non-partisan
Tax Policy Institute reported that Romney's tax proposals are likely to result
in a net tax increase of $2,000 for middle-class wage earners while reducing the
taxes of the wealthiest Americans by hundreds of thousands of dollars, each.
Mr. "Free Stuff"
Mitt Romney is a hypocrite who accuses ordinary Americans of wanting
"free stuff" if they request affordable healthcare, even though it
seems he may have paid
virtually no taxes for years, despite being one of the
world's wealthiest men.
Why does Romney castigate ordinary Joes and Janes, if he evaded millions in taxes
himself, while supporting trillion-dollar bailouts for his super-rich
Wall Street cronies?
Does Romney believe in American exceptionalism, or just his own "exceptions" ...
as in unpaid income taxes? If Romney really believes in American exceptionalism, why
did he stash
so much of his fortune in Swiss bank accounts and
what appear to be Bermuda and Cayman Island shell corporations? He drives
American-made cars, so why does he trust so much of his immense wealth to
obscure banks, on tiny insecure islands? Why did a fabulously rich
man like Romney choose the Yugo of banks?
The answer seems obvious. A multi-million-dollar offshore "IRA" is a rich man's
way of thumbing his nose at the 99% of American taxpayers who have to pay their
taxes, rain or shine, via automatic payroll deductions. That Romney would treat other Americans so unjustly calls
his character into question.
The Romneybot
Have people taken to calling Romney the "Romneybot"
because he lacks the things that make human beings
human: warmth, humor, compassion, empathy, and a sense of fair play and justice?
It can be painful watching Romney when he tries to josh around with other people
or connect with them emotionally. Something appears
to be missing ... he really
does act like an android programmed to spit out the correct answers without
understanding the questions at the heart and gut
level. Americans want their presidents to care about Americans who are
suffering, and we have been fortunate to have had presidents who really did seem
to care: Lincoln, FDR, JFK, Carter, Reagan, Clinton and Obama, to name a few.
Even George W. Bush, for all the terrible mistakes he made, seemed to care; his
problems lay in other areas, such as thinking and speaking. But Romney strikes
me as being more like Nixon: something essential seems to be missing. This is
evidenced in their inability to connect with average Americans.
For instance, here's what Romney said recently about
less wealthy Americans who want affordable healthcare, referring to his speech
to the NAACP:
When I mentioned [that] I am going to get rid of Obamacare they weren’t
happy ... That’s okay. I want people to know what I stand for, and if I don’t
stand for what they want, go vote for someone else; that’s just fine … But I
hope people understand this, your friends who like Obamacare, you remind them of
this, if they want more stuff from government tell them to go vote for the other
guy — more free stuff.
But Romney seems to be all about "free stuff" ... for himself and his
super-rich friends. Even if it's somehow "wrong" for poor people to want affordable
healthcare for their children and aging parents, isn't it vastly worse from
someone richer than Midas to insult them while ripping apart their safety nets,
so that he can become even richer? (As I wrote this paragraph, I had a vision of
Ebenezer Scrooge denying raises to Bob Cratchit while Tiny Tim wasted away
for want of an operation.)
How can someone who gets away with highway robbery turn around and condemn
average Americans for requesting a much smaller break?
For instance, Romney served on the board of Damon
Clinical Laboratories, which pled guilty to charges of defrauding Medicare and
agreed to pay the largest health care criminal fraud fine
in history at the time, over $119 million altogether. Corporate Crime Reporter put it like
this: "As manager and board member of Damon Corp, Mitt Romney sits at the center
of one of the top 15 corporate crimes of the 1990’s." Romney never reported
Damon's fraud to the proper authorities. When Corning bought Damon, it
discovered the fraud and reported it. Bain and Romney earned millions from their
investment in Damon, but conveniently never noticed that Damon was obtaining
"free stuff" from our cash-strapped federal government. According to a
Boston Globe report, Romney claimed that he and fellow board
members uncovered what was later determined to be a criminal
scheme to defraud Medicare in 1993, yet acknowledged that the directors did not turn
over their findings to federal authorities who were then investigating the medical
testing industry. While Damon went bankrupt, with
thousands of employees losing their jobs, Bain Capital enjoyed a $12 million profit,
with
over $450,000 of that money going to Romney personally.
Is it fair that Romney made so much money from
healthcare, then turned around and mocked less advantaged people for only wanting
healthcare they can afford?
Please don't get me wrong: I don't begrudge Romney his success or his wealth.
But if it's true that he paid virtually no taxes for more than a decade, while
amassing a fortune estimated at $200 million or more, that seems
terribly unfair to the 99% of Americans who do pay their fair share of taxes,
rain or shine. When he mocks and criticizes them, that only adds insult to
injury and makes him seem like a heartless, soulless android ... the Romneybot.
Romney strikes me as a hypocritical creep for three reasons: (1)
he blasts Obamacare, but his Romneycare was
obviously the model for Obamacare; (2) he favors bailing out Wall Street
billionaires yet denies average Americans what he imperiously calls
"entitlements;" and (3) he has no compunction about taking "free stuff" himself,
by evading taxes despite his fabulous personal wealth.
Mr. "Free Stuff" Part II
Obviously, there is something terribly wrong when a rich, imperious tax dodger lectures
hard-working American taxpayers about not asking for "free stuff" when, in reality, all they want
is a fair shake.
Romney's hypocrisy about American healthcare seems to know no bounds. When he
traveled to Poland, he praised Poland for its economic success, but Poland
provides free medical care to all its citizens despite having less that half the
per-capita income of the U.S. When Romney traveled to Israel, he praised Israel
for its superior economy, which he attributed to a superior culture. But in
Israel, healthcare is universal and medical insurance is compulsory. As a
result, Israel has the fourth-highest life expectancy among
earth's nations, at 82 years. And of course Romney has no problem giving
"free stuff" to his rich friends in Israel. (He and Israeli Prime Minister
Benyamin "Bibi" Netanyahu are pals.) According to the Washington Report on
Middle Eastern Affairs, since 1949 the U.S. government has given Israel more
than $134 billion in financial aid. That's more than $23,000 per Israeli
citizen. So American taxpayers who struggle to afford healthcare for themselves
have probably paid for every Israeli citizen to enjoy superior healthcare,
either in whole or in part.
Before Romney lectures Americans, I think he should listen for a change to a
real conservative:
Foreign aid is taking money from the poor people of a rich country and giving it to the rich people of a poor country.—Ron Paul
Why does Romney want to give "free stuff" to his rich friends in Israel, why
denying affordable healthcare to Americans? Is it because Romney is getting
"free stuff" from rich, powerful Jews, in return for Romney selling his fellow
citizens down the river?
Romney's Tax Returns
Romney also derides
Americans for requesting affordable healthcare out of self-interest because conservatives hate
President Obama and he will win a lot of conservative votes and campaign cash by opposing
Obamacare, even though it was modeled after his own Romneycare. But do we need a
president who puts his interest above those of 300 million Americans? Do we want
a president who cheats on his taxes, when he's richer than Midas? Do we want a
president who will say anything to anyone in order to glean
cash and votes?
Now, on to those troublesome tax returns ...
Joshua Green, writing in Businessweek, asked the question that's on
everyone's mind: "What's Romney Hiding in His Tax Returns?" In his article,
Green made the point that because Romney has released his 2010 and estimated
2011 tax returns, but won't release his 2009 return, there must be something
damning in the 2009 return. But if the 2009 return was an anomaly, Romney could
release his returns for the ten prior years, or at least disclose the amounts he
paid in taxes each year, then explain why 2009 was the exception to the rule. So
I think it is more likely that there are serious problems with many (or all) of
his tax returns for years prior to 2010.
Matt Yglesias of Slate.com has suggested a different
2009 scenario: that Romney may not have previously been disclosing the Swiss
bank account mentioned in his 2010 return. In 2009, the IRS offered amnesty to
taxpayers who had been hiding Swiss accounts: essentially, "Disclose and ante
up, and we won't send you to jail." Is it possible that Romney took that deal,
which might seem like the confession of a crime to the American public?
Ezra Klein, writing for The Washington Post, speculates that Romney's
effective tax rate may have been so low for certain years, including 2009, that
to reveal the percentages might be political suicide. My educated guess is that
Klein is correct. I think, based on remarks made by "people in the know" like
Senate Majority Leader Harry Reid, that Romney's effective tax rates for the
years 2009 and prior may have been closer to 0% than to his 2010 rate of 14%. Thus,
Romney can't reveal his tax returns because they make him seem like a shyster.
Quite probably, because he is.
Also, if Romney has sheltered half his wealth or
more from income taxes, even the 14% disclosed in 2009 may be wildly overstated,
since it would be based on artificially reduced base revenues. If any Romney tax
return prior to 2010 showed large investments being wildly devalued to a few
thousand dollars, then placed in offshore "IRAs" ... well, the jig would be up,
and Romney might be in danger of huge tax liabilities, penalties and jail. From
what I have gathered in my research, it seems entire Bain-owned companies may
have been placed in a series of such "IRAs." If so, it would be more than just
political suicide for Romney to release his returns.
This would also explain why the Romneys look and act so positively weird
when the subject of tax returns is raised. Mitt's wife, Ann Romney, who has offshore accounts and a horse in the Olympics, recently
told Robin Roberts imperiously, "We have given all you people need to know and
understand about our financial situation and how we live our life." She
sounded like a feudal queen talking down to a bunch of serfs. Like her
imperious husband, she seems to think the America public doesn't deserve full disclosure.
Who the hell are we to question someone rich enough to have Swiss bank accounts, Bermuda trusts,
Cayman Island IRAs, and horses in the Olympics?
Mr. "Free Stuff" Part III
In any case, it seems Mitt Romney had no compunctions about
getting "free stuff" himself.
Take, for example, GST Steel. Romney's company Bain Capital bought GST Steel for
$75 million, but put only $8 million of its own money into the deal, borrowing
the rest. Within a year, Romney and Bain had saddled GST Steel with another $125
million in debt, with $36 million of the borrowed money being
paid to Romney and Bain as a dividend. So less than a year after loading
the company with debt 15 times the amount they had
invested, Romney and Bain gave themselves bonuses four times their
investment. What tax rate did they pay on that unearned income? A measly 15
percent, thanks to the "free stuff" available to rich investors in the U.S. tax
code. And at the same time Romney and Bain were pocketing $36 million in
borrowed funds, they were asking Kansas City to forfeit $3 million in public
money to give them tax breaks.
That's even more free stuff. Furthermore, when GST Steel filed for
bankruptcy and laid off 750 people, it turned out
that Bain had underfunded its pension obligations to those employees. So the
federal government's pension benefit guarantee corporation was stuck with a $44
million bill. Thus, Bain cost the government $44 million for the pensions, $3 million
for the local tax breaks and $7 million in federal taxes. That's $54 million in
"free stuff" from the government. And that was just one of Romney's and Bain's
"success" stories.
"Mr. Romney’s Financial Black Hole," a July 10, 2012 editorial in the New
York Times, explains why the sketchy
information released by Romney to date indicates
"a concerted effort to park much of his wealth in overseas tax shelters,
suggesting a widespread pattern of tax avoidance unlike that of any previous
[presidential] candidate."
Meanwhile, in a remarkable accusation, Senate Majority Leader Harry Reid
recently said, "His father,
George Romney, set the precedent that people running for president would file
their tax returns ... but Mitt Romney can’t do that
because he’s basically paid no taxesin
the prior 12 years."
How is it possible that one of American's wealthiest men paid virtually no taxes
for 12 years? If Reid's statement is false, Mitt Romney
could simply produce his tax returns and disprove it. But instead Romney seems
to be confirming that where there is smoke there is also fire, by adamantly
refusing to release any of his returns prior to 2010. As a result, even arch-conservatives
like Newt Gingrich, George Will, Bill Kristol, Matthew Dowd, Haley Barbour and
Michael Steele have added their voices to those of liberals who have been upbraiding Romney in public. As
Will said recently, "The cost of not releasing the returns are clear, therefore,
he must have calculated that there are higher costs in releasing them." Dowd
agreed, saying, "There’s obviously something there, because if there was nothing
there, he would say, ‘Have at it.’" Kristol called it "crazy" for Romney not to
release more returns.
But perhaps he can't release his returns, without risking charges of illegal
income tax evasion. Did Romney break the letter of the tax
law, as well as the spirit? Has he sheltered
up to $100 million of his personal fortune in offshore IRAs, as various
reputable news services have suggested? If Romney protected most of his wealth from income taxes, his effective tax rate
prior to 2010 may be
closer to 0% than 14%, and that would explain him
blinking and squirming like a fish out
of water when he was asked to disclose his
taxes during a Republican presidential debate. When I saw the
usually-confident Romney
hemming and hawing about disclosing his returns,
to a chorus of boos, I knew there was something in them that he didn't want the American public to
see ...
During the debate in question, Newt Gingrich pointed out that there was no
rational reason to delay disclosing tax returns for
prior years, and that American voters have the right to see such
returns before they vote. Debate moderator John King mentioned that
Mitt's father had voluntarily disclosed tax returns for
12 years, when he ran for president, pointing out that disclosing just
one year's return could be seen as non-representative and/or deceptive.
But it was obvious that Mitt Romney wanted people to vote before he
disclosed any of his returns, and that makes no sense unless there's
something in the older returns that he doesn't want American voters to see.
(Multi-million dollar tax dodges, perhaps?) In any case, since 1967,
presidential candidates have voluntarily disclosed multiple years of tax
returns. The first to do so was George Romney. Ironically, the first since then to refuse
to do so is his son, Mitt Romney.
Here's my main question: If what Romney did is on the up-and-up, why doesn't he just say,
"Look, what I did was perfectly legal, but it is unfair to other American
taxpayers, and we need to fix the unfair tax system and close the loopholes."
But by refusing to disclose his older tax returns, he gives the strong
impression that he did something wrong.
As reported by reputable news services like the New York Times,
Wall Street Journal,TIME, Reuters, CBS News and Huffington Post, Romney may have sheltered his
Bain holdings from taxes, in offshore accounts. For example, a Bermuda-based vehicle
called the Sankaty High Yield Asset Investors Ltd. has been described in
securities filings as "a Bermuda corporation wholly owned by W. Mitt Romney."
Romney transferred his wife’s newly-created blind trust to Sankaty on January 1,
2003, the day before he was sworn in as governor of Massachusetts. Sankaty's
director and president is R. Bradford Malt, Romney’s personal lawyer.
Romney failed to list Sankaty on several financial disclosures, even though
such a closely-held vehicle would seemingly not qualify as an "excepted investment fund."
According to what Romney aides have said the past, some of Romney's funds may
have below the $1,000 in assets that would trigger
disclosure requirements. But Sankaty was used in Bain's
billion-dollar takeover of Domino's Pizza and other multimillion-dollar
investment deals. And yet Sankaty was only
made public when Romney disclosed his 2010 tax return, after being pressured to
do so during the debates. Having most or much of his wealth in offshore
tax shelters could easily explain Romney's fish-out-of-water
act, when pressured to disclose his returns. And it's hard to imagine that the
wife of a multimillionaire has under $1,000 in her trust. Who even bothers to
set up overseas trusts for a few hundred dollars? Surely the American public
has the right to know why a man running for president has so many offshore
accounts that give every appearance of being part of a shell game to avoid U.S. income taxes. Is there any reason to create shell companies in Bermuda and the
Cayman Islands, other than to avoid U.S. laws and taxes?
As Nicholas Shaxson pointed out in a recent Vanity Fair article, such
investments "provided a lavish smorgasbord for Romney’s critics. Particularly
jarring were the Romneys’ many offshore accounts. As Newt Gingrich put it during
the primary season, 'I don’t know of any American president who has had a Swiss
bank account.' But Romney has, as well as other interests in such tax havens as
Bermuda and the Cayman Islands."
To date, Romney has released a full tax filing only
for 2010. Former President Bill Clinton recently told NBC's Today Show
that Mitt Romney's hesitation to release more tax returns struck him as "odd,"
saying, "I am a little surprised he only released a year's worth of tax returns.
That kind of perplexed me, because this is the first time in, I don't know, more
than 30 years that anybody running for president has only done that. You know,
it's typical we all release 10, 11 years; I think Senator McCain released over
20 years of tax returns." (And of course Romney's father set the precedent by
voluntarily releasing 12 years of tax returns when he ran for president.)
And there is good reason to question whether Romney's "blind trusts" are really
blind. For instance, one of the investments that R. Bradford Malt made with
Romney's "blind" trust was to put $10 million in Solamere, a company co-founded
by Romney’s son Tagg and Romney’s campaign finance chair, Spencer Zwick. The
Solamere investment strongly suggests that Romney’s "blind" trust is operating
under Romney's watchful eye. And if you don’t believe me, please consult an
expert: in 1994, Mitt Romney explained that the
"blind trust is an age old ruse!"
Romney’s $101 Million Cayman Island IRA
How did Mitt Romney end up with a
$101 million Cayman Island IRA? It seems Romney may have sheltered all
or most of his Bain Capital wealth from taxes by putting it into an offshore "IRA" and
only allowing it to be valued correctly once the appreciation was protected from
taxes. If there is some other reasonable explanation for how anyone's IRA can be
so huge, when contributions are limited to a few thousand dollars per year, I'd
like to hear it.
I first became suspicious about Romney's finances when he
started squirming like a fish out of water when asked
about releasing his tax returns during a Republican presidential debate. I was sure at that moment that
there was something in his tax returns that he didn't want the public to see.
Ironically, Romney's father, George W. Romney, had voluntarily released his tax
returns for twelve years when he became a presidential candidate in 1967.
But Mitt Romney's public squirmings told me that something was obviously wrong
with his tax returns. Then later something in a
Huffington Post
article about his tax returns caught my eye, because a single Bain fund was valued at $5 million to
$25 million, and yet it was called only "part" of his total IRA. Most
IRAs are relatively small because the contributions are capped at a few thousand
dollars per year. Romney's IRA seemed impossibly large, and it also seemed extremely
odd that it was made up of multiple offshore Bain investments in the
Cayman Islands, which are world-famous for two things: beautiful beaches and
hideous tax shelters. So I began trying
to determine what Romney's full IRA amounted to. Here's a Reuters report that I
found on the subject ...
How did Romney's IRA grow so big?
Reuters
by Lynnley Browning
Monday, January 23, 2012
In the wake of news reports last week that presidential contender Mitt Romney
owns an individual retirement account worth as much as $101 million, questions
are growing over how it could have gotten so big when contribution limits are
capped at $5,000 or $6,000 a year.
Tax lawyers and accountants suggest an answer: Romney may have made use of an
Internal Revenue Service loophole that allows investors to undervalue interests
in investment partnerships when first putting them into an IRA. These assets can
produce returns far in excess of those that could be generated from other
investments made at the capped level.
An investor could even set an initial value for a partnership interest at
zero dollars, because under tax regulations an interest in a partnership
represents future income, not current value, said Chris Sanchirico, co-director
of the Center for Tax Law and Policy at the University of Pennsylvania Law
School.
Whether Romney used this technique, which is legal, when he put partnership
interests into his IRA is a question that won't likely be answered when he
discloses his 2010 tax returns on Tuesday.
Romney's IRA, valued at between $20.7 million and $101.6 million, as reported
by The Wall Street Journal last Thursday, holds stakes in 13 investment entities
run by Bain Capital, the private-equity firm he cofounded and led for 13 years.
"One possibility for its size is that he put his Bain partnership interests
into the IRA and valued them at a very low number," said David Weisbach, a law
professor who focuses on tax at the University of Chicago Law School.
Andrea Saul, a spokeswoman for the Romney campaign, declined to respond to
emails and calls.
In the wake of growing scrutiny of his personal wealth, Romney, one of the
wealthiest contenders ever for the White House, told Fox News host Chris Wallace
on Sunday that on Tuesday he would release his 2010 tax returns and estimates
for his 2011 return.
The release will not provide much insight into his IRA. That is because a
personal income-tax return shows IRA contributions and withdrawals only for the
year of the return, and not for previous years, and does not show whether any
contributions were in the form of undervalued partnership interests. While an
IRA investor can sometimes be required to file a separate return for the IRA, it
is unclear whether Romney intends to release any such returns.
Romney's personal financial summary, disclosed last August under federal
election rules, shows that his IRA holds his most lucrative investments, which
are stakes in partnerships run by Bain Capital. Those stakes include Bcip Trust
Associates III, a Bain fund that is his single largest investment, with assets
valued at $5,000,001 to $25,000,000. Bcip Trust Associates III produced income
to Romney's IRA of over $5,000,000 over 2010 and through August 12, 2011,
according to the summary.
Robert Stack, head of international tax at law firm Ivins Phillips & Barker,
said it is possible that Romney's IRA grew so large not only because of an
increase in the value of the funds in which it invests but also through
lucrative profits, typically 20 percent of investment gains per year, that funds
can generate for their general partners.
It is not known whether Romney is a general partner in the Bain funds,
meaning invested in the partnership responsible for managing the funds, or
simply an investor in the funds. The Romney campaign has declined to comment on
this issue.
The general partners' cut of the profit, known as carried interest, is
taxable each year if the funds in which the IRA is invested earn certain
management fees or borrow to make their investments. Tax lawyers say they want
to know whether Romney's IRA holds any carried interest and whether it has paid
tax on it—something not disclosed in his personal financial summary or on a
federal income tax return. "In the context of a $100 million IRA, that is what
we would want to know," said David Miller, a tax lawyer at Cadwalader Wickersham
& Taft.
The average IRA held by Americans holds $42,500, according to the Investment
Company Institute, a trade group. While the Romney campaign has said that some
of his IRA consists of retirement savings rolled over from previous plans,
accountants say rollovers would not likely explain the size of his IRA.
"Even if he rolled over a 401k, with the annual caps on contributions, you're
still only talking about a few million dollars," said Robert Green, an
accountant who is founder of Green Trading, a tax and accounting firm that
caters to the investment industry. Last year, individuals could contribute a
maximum of $16,500 a year to their 401(k) plans.
Tax lawyers say it is also important to know whether Romney's IRA holds
stakes in Bain funds directly, or through related, offshore entities.
These entities, commonly used by tax-exempt investors such as Romney's IRA,
legally allow the investors to avoid having to pay a special tax, known as the
unearned business income tax, or UBTI.
While the Wall Street Journal suggested on Thursday that avoidance of the
special tax was a big reason for the size of Romney's IRA, some tax lawyers said
that its size might simply reflect the extreme profitability of a carried
interest held by the IRA. "The best guess is that he put the carried interest
into the IRA," Miller said.
Romney's IRA produced income of $1.5 million to $8.5 million over 2010 and
through August 12, 2011, according to his financial summary, but it is unknown
what, if any, taxes the IRA may have paid on its carried interest. Saul,
Romney's campaign spokeswoman, declined requests for comment.
(Reporting by Lynnley Browning; Additional reporting by Gregory Roumeliotis;
Editing by Amy Stevens, Eddie Evans and Carol Bishopric)
The average American IRA is $42,500, so
Romney’s seems outrageously large. His IRA produced income of $1.5 million to
$8.5 million between 2010 and 2011, so it seems quite possible that it
may be closer to the high end estimate of $101.6 million. Romney’s total
wealth has been estimated at around $200 million. If he shielded half his money
from all taxes, that would seem to drop his effective tax rate from around 14%
to around 7%. And that would explain why he looked like a fish out of water when
he was asked about disclosing his tax returns. In this case, I suspect that two
plus two probably results in four ... as in four more years for President Barack
Obama.