Mitt Romney’s campaign has tried desperately to put a lid back on the can of worms that burst open weeks ago when the one-time GOP presidential front runner declined to release any of his tax returns.
But by actually releasing his 2010 return, and an estimation of his 2011 return, camp Romney has provided reporters with some, but not all, of the answers they’re looking for as they try to paint a complete picture of the finances of one of the wealthiest candidates for President in U.S. history.
Romney’s revelations confirm that his effective tax rates in the past couple years have been as low or lower than those of workers with truly modest means. They also confirm that he’s availed himself of truly complex tax strategies designed to boil his liability down to the lowest level allowed by the country’s heavily rigged, labyrinthine tax code. And we know, too, that these are things Romney didn’t want voters to know — at least not yet.
But they raise a series of new questions that will likely require Romney to disclose several years’ worth of additional tax returns if he wants to answer them satisfactorily. Here are three big ones that touch generally on the theme of Romney’s efforts to reduce his tax burden by taking advantage of areas of the law that simply aren’t available to most people.
How Low Do They REALLY Go
Romney’s effective tax rate was 13.9 percent of his adjusted gross income (AGI) in 2010, and is expected to be slightly higher in 2011. Set aside for now the fact that for a high net worth individual like Romney, AGI often understates what you might call “true” income — meaning these effective tax rates probably overstate Romney’s 2010 and 2011 tax liability. It turns out that in 2009, in the wake of the financial crisis, Romney very likely managed to get his effective tax rate much lower than 13.9 percent. In 2010, Romney carried over $4.9 million in capital losses from 2009. This is a consequence of the tax code’s leniency toward investors who take hits in bad years. But as tax lawyer Ed Kleinbard told reporters during a Tuesday conference call organized by the DNC, “that means he paid no tax on any of his capital gains in 2009, including tax on his carried interest in 2009.” That’s not necessarily because Romney actually lost money in 2009, either. As Kleinbard explained, a common tactic for Americans with capital gains is to “harvest” — by selling off certain investments that lose value investors can count the losses against gains elsewhere in their portfolios. If those losses exceed the gains by more than a certain amount, they roll over into the following tax cycle. Unless Romney had significant sources of non-investment income, that suggests his effective tax rate in 2009 was much lower than 13.9 percent. And remember, he jokes he’s been unemployed for years.
That UBIT Bit
One of camp Romney’s chief claims has been that his offshore investments haven’t been covers for deferring or avoiding U.S. taxation. But as described, here, there is one tax strategy that could have allowed Romney to avoid a big, 35 percent tax on unrelated business income, as it pertains to his massive individual retirement account — if that account is invested in an offshore entity. When asked Tuesday if Romney has ever benefited from this strategy, his trust adviser Brad Malt said, “I don’t know the answer to that — let us get back to you on that.” We haven’t received an answer yet, but we’ll pass it along when we get it.
Swiss Amiss?
Romney’s 2010 tax return reveals a Swiss bank account. “It is listed because I set that account up for diversification in 2003 when I became trustee of the blind trusts,” Malt said. “It is a bank account. Nothing more, nothing less. An ordinary bank account. It earns some income which is fully reported on the form 1040. In the 2010 tax return, you’ll see approximately $1,700 in interest earned by this account, which is reported. The tax is fully paid just as if this were a U.S. bank account. Nothing more complicated than that. By the way, I did close this account in early 2010. It no longer exists.”
Some reports suggest that the account was closed for political reasons, but Malt said “I regularly review Governor Romney’s investments just in connection with my periodic reviews, I decided that this account wasn’t serving any particular purpose….Again, taxes were all fully paid etc. But it just wasn’t worth it. And I closed the account.” Tax experts have noted to TPM in recent days that U.S. law changed shortly before then, to make it harder for U.S. persons to avail themselves of tax havens. Shortly thereafter the IRS gave people secreting their money abroad a time window for compliance. Taking camp Romney at its word, that wasn’t really their concern. Even if the account existed for purposes of diversification that could be politically embarrassing in and of itself, constituting a bet against U.S. currency. But to fully answer the question, we’d need to know if that bank account is declared in the years before the law changed. Camp Romney did not respond to a request for comment on this point Tuesday.
Brian Beutler
Brian Beutler is TPM's senior congressional reporter. Since 2009, he's led coverage of health care reform, Wall Street reform, taxes, the GOP budget, the government shutdown fight, and the debt limit fight. He can be reached at brian@talkingpointsmemo.com.
Romney now says that his "actual" tax rate is 15% plus the 35% corporate rate at Bain. So, does that mean that a secretary or a janitor at, say, Bain Capital is paying a rate of 10% plus the 35% corporate rate? Do we all get to include the taxes paid by our employers in addition to our own personal rate in saying what rate we pay? (I'm ignoring the fact that few corporations actually pay that 35% rate, due to the numerous loopholes they can take advantage of.)
The most important question is not whether he paid taxes on the Swiss accounts. Romney may have used the account to launder transactions. Most of the journalism looks at a 3 million dollar balance and asks whether he paid tax on his savings. I don't doubt that he did. But what I want to know is:
How much money did he run in and out of that account?
What was the source of the money deposited in the account?
Did he disburse money from that account to any individuals, corporations or organizations? Who? Which?
If you aren't using the Swiss account as a way to shelter your income then you must have some other purpose for opening that account. Why did Mitt need that account since he says he paid his taxes on earnings in it?
So ... did Romney use the account to hide sketchy transactions?
With regards to his Swiss bank account, the timing is rather curious. Remember, the Obama DOJ was going after Swiss bank accounts in 2009-2010 (possibly continuing) and if he closed it in 2010, he might have been afraid that the US would find his account and release his name.
Calchala
he is allowed to have swiss bank accounts, as are you. are you implying he didn't pay taxes on this account? the pbama administration was going after people who didn't pay taxes on these accounts. you know , like mark rich, who clinton pardon on his last day in office. rich, despite the pardon, never returned to america, because he still owes the back taxes.
mitt paid all taxes due. the nitwits on this thread want america to become a welfare state [and its close right now]. i want to stay with free enterprize. i do not want it to be like europe, i've been there and its not so great. on top of that they are really overtaxed. what will you do when you get your welfare state? they will take your last dollar.
jjdjjd A "welfare state?" It appears that you may watch too much of Fox "News." You are sadly misguided and uninformed. Do you even know what a "welfare state" is? Hell, you can't even spell free enterprise, so it's doubtful that you even know what that is.
Poll after poll after poll after poll has shown that a majority of Americans want the ultra-rich like Mitt to have his taxes assessed at least at the same tax rate used for the rest of us, if not higher. The justification that the Bush administration and other republicans gave to pass these tax cuts for these rich bastards was that they would use the benefits to create jobs. jjdjjd, where are the friggin jobs that Mittens created with his tax benefit? WHERE ARE THE JOBS?? No one has asked Mitt that yet. Hopefully the subject will come up at tomorrow's debate. Since it's a CNN debate, it's highly doubtful that it will.
lkatrell
i did spell enterprise the wrong way, on that issue you are correct. as for a welfare state, it is when the government plays a central role in the redistribution of wealth. there are many models of this, one is called the 'nordic model'. it is perhaps the most radical and is used by the nordic countries like sweden and finland. other western european counties also are welfare states but use their own formula. a full response is not possible as TPM limits the characters, but the short version is we are damn close to a welfare state now, and obama is just the man to turn us into another Greece.
jjdjjd. lkatrell. But Romney and Gingrich want to change the tax code to redistribute wealth in a different manner, lowering taxes on capital gains even further which favors mainly millionaires, and also by increasing taxes on poor and middle income people (which is what a flat tax does). All taxation, by its very nature, is redistribution of wealth. The question is which people are most able to pay the taxes without having it affect their standard of living? Our country's founders always intended the very wealthy to pay most of the taxes used to run the country. That's how it worked then and that's how it should work now.
simkatu
ah, our founders intended no such thing. there was no income tax for 125 years after our country was founded. revenue for the fedral government was provided by duties on imports and other such things. income taxes began as the government grew. my grandfather, as a young man, took home what he was paid. taxes exploded under FDR, perhaps the father of american socialism. stop making things up.
simkatu
remember, INCOME TAXES, that is taxes on our income, came about in 1916, less then 100 years ago. the very idea of taxes on our income would have repulsed our founders. there were taxes on imports, whiskey [a small wae started over that] and local taxes of course, but no taxes on income until 1916. once, in the 19th century, the feds tried it, it was overturned by the supreme court. my goodness, how could you not know that.
simkatu
as for taxing capital gains, most all of us will pay them at some point, through the sale of our home, our IRA'S or 401k plans. thats the great scam, i don't give a hoot about millionaires, but when i sell my home, which i paid $60k for in 1980 [now worth about $300k,] i'm not going to like paying those taxes, and i don't think you will either. where do those taxes go? to people who worked less hard then me. and i don't like supporting them.
jjdjjd simkatu The income tax came in as a replacement for income on liquor that was to be lost under Prohibition. Jdjjd, you must know that. Taxes, frankly, are always attempted on the other as much as possible. But with the major loss of liquor taxes - absolutely skewed since those who didn't drink didn't pay tax. What bothers me about the "welfare state" argument are the way it ignores the very beginning of the Constitition, "We the people...." What about that doesn't state we're in this together? I'm a church person, and in the church we talk about. "time, talent and treasure," recognizing we all have different gifts. Also, to me, meaning those with are called to give fully of the gifts we have. Since we're also supposed to be a Christian nation, that along with "We the people" should say it all. Not the noise about redistribution, punishing people for having, etc. the wild west myth of being alone and doing things yourself, by the way, is a great myth. After all, there were wagon trains, and towns (and churches) were the centers of activity. Together. You know, we the people. Like the constitution says.
jjdjjd Though, right now, it appears that Mitt reaped a huge benefit that ordinary Americans are not entitled to, i.e., a 13.9% tax rate, did not do what republicans claimed he would do with that benefit, i.e., create friggin jobs, parked his money, and continued to get richer. Invest in America? Whatever! Mitt Romney invested in Sweden, Ireland, & the Cayman Islands!
Turn off Fox "News." The damage it has caused to you may still be reversible!
lkatrell
his investments in mutual funds provides funds to companies that provide jobs. do you really think that his $250 million is parked in a savings account doing nothing? or are you so stupid that you really don't know how the economy works? capital is the lifeblood of any company, without it they die.
jjdjjdlkatrell About 30% or 12.9 million of the 42 million Romney made over the last 2 years, is "carried interest". These are performance bonuses from Bain that because of a loophole are taxed as capital gains. Here is an explanation. http://www.marketwatch.com/story/private-equity-ca.... The important thing to realize is that carried interest is not based on money that Romney put at risk, but rather Bain investors money. If taxed at the wage rate of 35% rather than the preferential rate of 15%, he would have paid an additional 2.58 million dollars in taxes, bringing his total taxes over 2 years from 6.2 to 8.78 million off of 42 million in income or 14.7% to 20.6%.
Exactly, RMoney and Newt and buddies want to lower their taxes further so they can continue to ship our jobs and US money overseas because surprise surprise the so-called job creators don't create jobs. They sit on their overseas bank accounts and lie about creating jobs that they don't create. This all started with the Bush tax cuts and it's only gotten worse. RMoney's never created a real job in his life, just cremated them and shipped them overseas.
Like his dad said when he released twelve years of returns, releasing just one or two years could be "just for show." Like red XIV said, we really need to see what you were doing when you weren't running for office. His income tax returns are highly relevant as he is running on his record as an entrerpreneur and job creator. Just like examining a Senator's voting record is fair game to a legislator, examining Romney's tax records is fair game to a venture capitalist.
Murdoch: 'Romney's Tax Returns Might Kill His Chances'
Mitt: Et tu, Upertray?
Really, now, Mitt's a regular guy, just like us. The only difference is that he's never had wonder where the rent / mortgage money was going to come from, never had to worry about how he'd pay for health care, never had to worry whether he'll be able to retire one day, never had to drive a car that's on its last legs, never had to choose between generic peanut butter and name brand, never had to....
Okay, Mittens, now show us what your tax returns looked like when you WEREN'T "running for office, for Pete's sake."
doesn't this guy remind you of the time the first bush was baffled by grocery store check out scanners? we're not envious of you willard we just want you to pay your fair share like the rest of us HAVE TO DO.
Perry Winslow Jr. That is exactly right. Same thing as the scanner. Most his disconnect brings back that moment when Daddy Bush saw the supermarket scanner looked like he was a native seeing magic fire sticks for the first time.
It's completely unfair to Income-itself to divisively put it in earned/unearned/wages/capital gains categories. We are One Income Under God, and it is unconscionable to question how much of it goes to whom, why some forms that only require holding a piece of paper get taxed at very low rates, while other forms can require years of education, student loan debt, and years of hard work and be taxed at very high rates. Let the income go where it wants to go, and be taxed the way it wants to be taxed. Thankfully, the Income gets to act through the persons and policymakers it holds most dear.
Here is a guy who avoided Nam by going to France and while their attempted to convert Christians to his Mormon Cult. He wears a U>S< Flag pin in his lapel yet this country was involved in two wars in the past Ten years and neither of his five sons saw it their duty to serve this country. Mitt fits the patteren of most 1% let others go to war and defend them.
One question no one seems to be asking is, Where is the 990 PF for the Tyler Foundation which he controls? How many family members are employed by it? How much of the $1.7 million was actually disbursed for legitimate charitable purposes and how much is just sitting there?
glennla I'm going to hope that at least one enterprising reporter is looking through those as we speak. Mitt has the 2010 990 posted on his site, but I think returns for previous years are available from the Foundation Center and/or Guidestar.com.
I took a quick look at the 2010 return. Nothing really stood out. It had about $10 million in assets, gave out about 650k in grants. Only one trustee -- a Boston lawyer by the impossibly WASPy name of R. Bradford Malt.
The foundation's two largest grants in 2010 were to the LDS and to the George W. Bush Presidential Library -- which I guess kinda shows you where Mitt's head is at, at least last year.
You have to wonder, going forward who the GOP can run in a Presidential race. Wall Street Guy isn't working out, that's for sure. And it may not ever work out, now. Which of their factions can offer a leader that can attract a wide audience within the party and then in a general election anymore?
Barring a huge mess up by a Dem president, I can't see how they get the presidency back, especially if they lose this time-- and have to counter the big pieces of ACA that start in '14.
austin-dave Well, it wasn't like Nixon or Dumbya was such a great candidate that people couldn't wait to vote for them. In the last 100 years, parties which have held the Presidency for 8 years or longer have won 5 elections and lost ten. The American people have the attention span of a three-year-old on a sugar buzz.
Questions 4: Did the presence of Bain investment funds in the Caymans allow either U.S. non-profits or foreign investors (if there actually were any) to engage in tax evasion, not just avoidance, by not reporting their Cayman presence (Cayman has some of the toughest secrecy laws in the world)?
And did Bain lobby to preserve the carried interest loophole in 2007? Yes: http://middleclasspoliticaleconomist.blogspot.com/...
Kenneth Thomas Wow. The power is in the Rules. Make the rules and you have the power.
@austin-dave @Kenneth Thomas One ring to rule them, one ring to bind them . . .
How would merely opening a Swiss Bank account diversify his portfolio? What was the reasoning?
@Doremus Jessup 2.0 I'm assuming he was holding Swiss francs as a way of shorting the dollar. Although there are much cheaper, less obvious ways of doing that -- options and currency forwards, for example.
Or, he might have been playing the carry trade -- borrowing at Swiss interest rates (which were then quite a bit lower than US rates) and investing the money in higher yielding bonds, either in the US or some other country. He'd have needed a Bank account on the Swiss end to do that, I think.
That would actually have been a bullish bet ON the dollar, since any decline in the dollar's value against the franc would have subtracted from the profits on the yield carry.
Or it might have been part of some even more esoteric and profitable trading strategy that I've never heard of before.
Welcome to the wonderful world of financial globalization.
Swiss Mitt!
booch221 + 1.
The most despicable thing about this is not that the Mittster is trying to strawman the issue by claiming it's about jealousy of his wealth and by claiming that opponents think he should not have taken advantage of the tax laws as they are written. No, it's that all the other Republican candidates think that capital gains rates should be zero, which would leave Mittens paying almost no federal income tax whatsover on his millions and millions of income. We should use Willard as the posterchild for why capital gains taxes need to be increased on the wealthy.
"In 2010, Romney carried over $4.9 million in capital losses from 2009. "
Okay, can someone please explain to me how Romney is able to do this, when I'm only able to deduct $3000/year in losses (from my whopping $15000 investments)? Yes I know the excess can be carried over to the next year, but it would take him approximately 1500 years to use up all of those losses if he was only able to deduct the same amount.
midnightrambler I believe you can offset capital gains dollar for dollar against capital losses. You seem to be referring to deducting capital losses from your salary/wage income, and there's a $3K limit on that. Just another way the system is rigged in favor of the wealthy.
It is a one to one write off for capital gains or it was! So maybe he lost $4.9 mil in the 2008 crash ! or more!
Has anyone posted this yet? It's Slate's calculator that shows you how long it takes R.Money to make your salary.
@austin-dave I din't know computers could measure such infintesimally small time periods.
Believe in America?
Really Mittens?
Something else deserves follow-up. The 2010 returns contain numerous statements about them being "in process" and, notably, there is no information about some of Romney's Bermuda accounts. The returns state that this information will be obtained and provided in 2011. So how much is in those accounts, how much income did they generate, and how much tax will he pay on those investments is still unknown.
Prior year tax returns would shed light on how much Romney has offshore.
jwsel Bermuda too? Why didn't he cut out the middleman and just buy his own Caribbean island nation?
webceltjwsel I really hope RMoney is the nominee, this stuff seems likes its bubbling over and just about ready to explode all over RMoney's face.
Mittens is definitely hiding something, if the jpournalists don't find it, Team Obama will. Mittens will neer be president of the USA.
“It is listed because I set that account up for diversification in 2003 when I became trustee of the blind trusts,”
So at the same time that our military people were fighting and dying in Iraq to save the world from Saddam's mythical WMDs, Mitt's "blind" trust was betting against the U.S. dollar.
You know, sometimes the 30-second spots write themselves.
peterprincipleI can't blame the man for betting against George W. Bush's management of the economy, with wars and tax cuts for the rich.
The sheer amount of money amazes me - who nets $21 MILLION dollars in a single year? What he paid in taxes for 2 years is more than twice what I'll earn in a lifetime. There is no way on earth that someone that rich, who was born rich, who had a privileged upbringing, who associates with people who are not blown away by the obscene amount of money he has, can possibly understand what life is like for most of us.
Doesn't mean he can't run for office - probably means he can't win.
Powkat
I don't think we'd care about his money if we wasn't so clearly out of touch.
"Money may be everything, but it matters how you use it." -- Archie Goodwin (perhaps not the exact quote, but the idea exactly)
Romney's tax form release was a eye opening moment for the people to see just what has been going on for the last 40+ years. Talk about class warfare; the richest people have been paying less and less by changing of the tax codes.
When you see it right before your eyes how the rich have done it and as we watch our middle class disappear and the GOP doesn't want no new taxes on the rich. It just makes me sick. These tax laws only help the richest in this country, so we see that this has got to change before our country is destroyed.
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