Blumner: Mitt Romney stays mum on tax avoidance
When you think of the wider world, which of these comes to mind?
1) The adventure of travel?
2) How are we going to maintain America's dominant position?
3) Where are you going to park your money?
Of the two men vying for the presidency, only one had that last thought. Mitt Romney's millions have been dispatched around the world, conveniently finding homes in foreign tax shelter countries.
Is that really as irrelevant as Romney wants to make it?
Romney is thought to be worth an estimated $250 million. He's a successful businessman, but is he a good citizen? Has Romney contributed to the commonweal by paying his fair share of taxes, or has he employed clever and controversial tax avoidance schemes? It's a question Romney could easily answer by disclosing several more years of tax records and the details of his overseas assets, but he won't.
The little we know of Romney's veiled finances has come to light only after much haranguing by his Republican primary opponents. Even then, he only released his 2010 tax return and estimates for 2011. Unlike his dad, George Romney, who famously released 12 years of returns before his run for president to engender transparency and trust, Mitt doesn't want to share. He wants to run on his record as a wealth-generating businessman while telling us not to follow the money.
What we know is that in 2010 and 2011 Romney and his wife paid a shockingly low income tax rate of about 15 percent -- far lower than what many middle-class American families pay. Mitt Romney gets this deal through an unconscionable tax loophole known as "carried interest," which allows private equity fund and hedge fund partners to claim their earnings as capital gains, taxed at 15 percent rather than the maximum 35 percent for income earned through salaries.
Still, Romney claims he pays all taxes that he legally owes, and his campaign says his overseas assets weren't used as tax shelters. Okay, perhaps, but a well-reported Vanity Fair piece, "Where the Money Lives" by Nicholas Shaxson, suggests that this is not something we should take on faith. For instance, Romney won't disclose the details of his Cayman Islands holdings, including as much as $30 million in at least 12 of the 138 Bain Capital funds that are organized there.
The tax advantages that come with locating a company in the Cayman Islands are so lucrative that 9,000 hedge funds are located there. Foreigners don't face taxes on income, capital gains or profits. The big loser is the U.S. Treasury.
Then there's Bermuda, another known tax haven. Romney created a Bermuda-based entity in 1997, wholly owned it, and transferred it to his wife's blind trust just before becoming governor of Massachusetts. According to Romney's 2010 tax return, there weren't many assets in it, but in prior years it could have sheltered significant assets. There's no way to know without Romney coming clean. He won't.
What gives? If it's relevant to know how much a presidential candidate pays to cut his hair (see John Edwards), shouldn't his foreign assets be fair game?
Romney and his wife have many of their assets in retirement accounts and blind trusts (though Shaxson suggests they may not be so blind). He could have asked their trust managers to avoid tax shelter countries, if for nothing else than to maintain appearances.
His 2010 return also reveals that he had $3 million socked away in a Swiss bank account (since closed by his trustee). Romney failed to fess up to it in prior financial disclosure forms, undoubtedly because the very term "Swiss bank account" conjures images of tax cheats in suits.
Whether technically legal or not, the idea of using international tax havens to skirt U.S. tax obligations is not only a rich man's sordid game, it also speaks to one's character. Romney's flirtation with countries of looser financial morals suggests that the candidate, who doesn't drink or have a wandering eye, may have a weakness after all.