Mitt Romney has a tax problem. With assets estimated at over a quarter billion dollars, Romney is one of the wealthiest men to have run for president, and if elected, would be the third richest presidents in history. He’s also probably among the slipperiest."When Mitt Romney’s father, a governor of Michigan and former president of the American Motors car manufacturer, ran for president, he released 10 years’ worth of tax returns so that Americans would know that, rich as he was, he was honest. Mitt Romney, running for President and about to accept the nomination of the Republican Party as its presidential candidate, has only released one year’s tax documents, for the year 2010, and even that release left out a few key pages. Mitt Romney has a tax problem. With assets estimated at over a quarter billion dollars, Romney is one of the wealthiest men to have run for president, and if elected, would be the third richest presidents in history. He’s also probably among the slipperiest.
A top graduate of Harvard Law School, where he specialized in business and tax law, Romney got rich not just by inheriting his father’s wealth, but by using his legal skills to create ways to minimize the taxes paid by his venture capital company, Bain Capital, and the companies that it bought up and “turned around.” He also used those legal skills to minimize his own personal and family taxes, setting up offshore accounts in tax-dodging havens like the Cayman Islands, Switzerland, Luxembourg and elsewhere.During the Republican primaries earlier this year, other candidates from his party, including Newt Gingrich, called on Romney to release his returns, calling him a possible tax cheat. Romney wouldn’t do it. Later, after he won enough primary delegates to the Republican Convention to assure that he would get the nomination, the Obama campaign -- and some key Republican politicians -- renewed the call for him to release other years’ tax filings. So far, despite the many calls from politicians and journalists for the tax documents, Romney has resisted, saying only that he will release his 2011 tax records on October 15, six months after they were due, and on the last possible day allowed without penalty by the Internal Revenue Service. That would be just two and a half weeks before election day, giving journalists and opposition party researchers precious little time to go over what will certainly be a several-hundred-page stack of complicated tax documents. Since by long tradition, candidates for president have voluntarily released to the public and the media two years’ worth of tax documents, if Romney, as he claims, is not ready with his 2011 taxes, why doesn’t he simply release his 2009 tax documents? Then the pressure to also release his 2011 taxes wouldn’t be so intense. The reason may be that 2009 was the year that the IRS, because of a whistleblower at Swiss Bank UBS who reported that tens of thousands of American millionaires were illegally hiding income at the bank, established a “get-out-of-jail” amnesty program: come forward to the IRS voluntarily and report all profits that had been hidden from the IRS illegally in overseas bank accounts and all felony fraud charges will be waived. Only the taxes, interest and penalties will be assessed. Some 30,000 Americans took advantage of that “keep out of jail” opportunity. Was Mitt Romney one of them? His 2009 tax form, and probably tax forms from earlier years which would have had to be “corrected” to account for the hidden money, would have that information. This explains why the Obama administration is demanding that Romney provide at lease the returns going back to 2007 -- a demand Romney has thus far ignored. There are other reasons Romney may also be hiding his returns -- and why even his 2010 return, which he did release, is incomplete. The IRS requires tax filers who have money held in foreign banks to report and list those banks and the amount of money in them, even if they were interest-free accounts that generated no income. The reason for this rule is that typically, interest-free overseas accounts are opened for the specific reason of dodging taxes and hiding income. That’s why the banks offering them, like UBS, the mega-bank in Zurich, don’t pay interest on the money on deposit. They know that the depositor isn’t looking for interest -- just a place to hide assets. There is a place on one of the tax forms that asks the taxpayer: “Do you have any money in non-interest-bearing accounts of foreign banks?” There is speculation that Romney may have checked “no” on that box in 2010, and maybe in other years, when in fact he did have such accounts. If he did that, he was committing felony tax fraud -- a crime punishable by jail time. As for his 2011 taxes, there is room for speculation there too. Many Americans take advantage of the late filing provision of the tax law. When things get busy just before the April 15 deadline for filing the prior year’s taxes, the government allows an automatic filing extension. It used to be four months. This year it is six months. An estimated payment of the tax liability must be made, but the actual documents calculating the tax and showing all the details of the filer’s income and expenses can be delayed without penalty. Usually this is something that only ordinary taxpayers avail themselves of. Wealthy taxpayers, like Romney, have armies of accounts handling the calculating, filling out and filing of their taxes, so there is never any need to request a delay. So why is Romney taking six months -- right up until almost Election Day -- to file his taxes this year? The answer may be that he and his accountants are working hard to massage the data, shift assets around, etc., to “clean up” his accounts to remove embarrassments, such as too-clever overseas tax dodges. A last matter is Romney’s role in the venture capital firm Bain Capital. Bain is known to have engaged in some very negative behavior, buying going concerns that then stripping them of their assets, laying off workers, and moving whatever is left abroad, to China or Mexico, where labor costs are cheaper. Romney has tried to escape the blame from this universally loathed behavior by claiming that since 1999, he has only been a “passive” investor in Bain Capital, not responsible for the activities of the company. The problem is that the company’s own corporate documents, filed annually with the Securities and Exchange Commission, list him during the period 1999-2002 as CEO, Chair, managing director and sole owner of Bain Capital. They also say he was paid at least $100,000 a year for his work for the firm during that period--a period that saw a number of American companies killed off and shipped abroad, leaving their US workers jobless. Romney has pooh-poohed the idea, claiming that those titles were meaningless, and were just “boilerplate.” In fact, he insists, he was just a passive investor in Bain.
Well, here again is where Romney’s missing tax forms come in. If he were to release his 2001 and 2002 tax forms, as his father would have done when he released a decade’s worth of his taxes, the American public and journalists would be able to see whether he checked the box stating whether he was an “active” or a “passive” investor in Bain when he earned that money. It is likely that he would have checked “active,” since the tax advantages to being an active investor over being a passive one are substantial under US tax law.It will be interesting and instructive to see how long Romney can keep stonewalling on releasing his tax forms, once the party conventions are over and the campaigns go into the final stretch after Labor Day. DL/JR