MEMO: What is Hiding in Romney’s Returns?
To: Interested Parties
FR: Bill Burton, Priorities USA Action
RE: Sunday Memo: What is Hiding in Romney’s Returns?
Governor Mitt Romney has a choice. He could decide to face months of bipartisan criticism for a failure to release his tax returns or he could confirm damaging information including further tax avoidance, new offshore accounts, and an even lower tax rate in previous years.
If there were nothing damaging in his tax returns, Romney would have already released them and avoided the spectacle of publicly refusing to show the American people what he has already shared with John McCain.
Instead, Romney appears to have decided that the information in his returns is so problematic that he will endure criticism from the right and left for his refusal to follow a well-established standard of transparency for Presidential candidates.
Release of Romney’s tax records would allow voters to fairly determine how his tax policy may be informed by personal experience. Among the things voters would learn are:
Extent of Romney tax avoidance in the Cayman Islands – Based on thorough reporting, we already know that Romney used funds based in the Cayman Islands that help him avoid paying a specific tax. This directly contradicts what the Romney Campaign told the public when confronted about Romney’s holding in the notorious tax haven. Tax records could clarify how long and to what extent Romney has been employing this technique.
Unreported foreign accounts – In just one year of tax returns, it was revealed that Romney had a multi-million dollar Swiss bank account as well as holdings in notorious tax havens in Europe and the Caribbean. Tax records would show whether Romney has a personal interest in the US Government’s efforts to crack down on foreign tax havens.
Romney’s lowest rate – In 2010, Romney was already beginning his second run for President and certainly had a team of lawyers and accountants review his tax returns. While Romney paid only 13.9% in taxes in 2010, it is likely his rate previous years was even lower, possibly even zero. Tax records would show Romney’s lowest tax rate and would provide context for his opposition to proposals like the Buffett Rule.
Senator Santorum correctly pointed out that the man who is running for President entirely based on his private sector financial success is the one who is most unwilling to share with the American people how he attained that success. It is time for Romney to stop stonewalling.
Priorities USA Action and American Bridge 21 Century Website: www.releaseyourreturns.com
Santorum: Since Romney Running on Economic Experience, We Should See How He Managed His Own Economy. Senator Santorum: “I don’t know why he isn’t releasing his tax returns. I think he should. I think it is appropriate that if you are going to run for federal office that you let folks know. Particularly someone with the enormity of wealth and he keeps going out there talking about, how he has all this experience, how he’s done all these things and he understands the economy. Well, let’s see how he managed his own economy.” [Santorum on Laura Ingraham via Daily Caller, 1/16/12]
Wall Street Journal: Romney Campaign Statement That He Received No Tax Benefit from Caymans “May Be Wrong or Misleading.” According to the Wall Street Journal, “Mitt Romney’s campaign has attacked an ABC News report on the candidate’s offshore investments, saying his holdings in the Cayman Islands and elsewhere have no effect on the amount he pays in U.S. taxes. But the campaign’s assertions may be wrong or misleading. Tax experts said some of the offshore holdings are likely intended to help Mr. Romney avoid paying an obscure but hefty tax of as much as 35% on some of those investments, held in a tax-deferred retirement account.” [Wall Street Journal, 1/19/12]
New York Times: Romney Appears to Have Used Cayman Islands for Tax Avoidance Technique. According to the New York Times, “The technique in question allows nonprofit institutions and large retirement funds to exploit the advantages of shell companies set up in tax havens like the Cayman Islands by investing money with private equity firms like Bain Capital, which Mr. Romney ran. Ordinarily, such private equity investments are frequently subject to something called the unrelated business income tax. But by going offshore, pension funds, universities, foundations and even large individual retirement accounts can structure those investments to avoid that heavy tax…Tax experts and former Finance Committee staff members say that Mr. Romney’s I.R.A. appears to have used the technique, and that he may have benefited personally.” [New York Times, 2/7/12]
Romney Tax Rate Likely Lower in Previous Years. According to the Huffington Post, “Mitt Romney's 2010 tax return is likely to serve as a flashpoint throughout the presidential campaign for critics who say the 13.9 percent effective tax rate he paid that year is unfairly low. It appears likely his tax burden was even lower the year before. Tax experts who closely reviewed returns released Tuesday told The Huffington Post that Romney probably did not pay any taxes on his investment income in 2009.” [Huffington Post, 1/24/12]
Romney Tax Rate “Much Lower” Than 13.9 In Previous Year. According to Talking Points Memo, “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.” [Talking Points Memo, 1/25/12]
Los Angeles Times: “Romney tax returns highlight tax code's breaks for rich” According to the Los Angeles Times, “Romney's tax returns reveal a sophisticated low-tax investment strategy that includes offshore funds and a now-shuttered Swiss bank account, contributing to a fortune that has emerged as a potential liability in his quest for the White House… The documents underscore how Romney, the wealthiest candidate to seek the presidency in recent history, has benefited from a tax code that lets investors pay taxes at a much lower rate than people who earn wages or salaries… Experts said Romney's low rate of taxation puts a focus on a tax code that has contributed to a widening gap between the rich and poor. "The question is whether this is appropriate policy going forward," said Kleinbard, who joined national Democrats on Tuesday in critiquing Romney's returns. "Is this candidate so financially invested in certain tax positions that he cannot divorce himself from decisions that are in the country's best interest?" [Los Angeles Time, 1/24/12]