Recent articles about Mitt's tax return disclosure make it clear that their is some posturing going on with respect to:
1. what they will release, and
2. when.
http://www.huffingtonpost.com/...
http://thinkprogress.org/...
http://www.washingtonpost.com/...
http://www.washingtonpost.com/...
So what do we know about Mitt's tax returns? Not much, there's only one out there.
2010 - Released It indicated a 13.9% rate on about $23 million of income, most of which was income from carried interests taxed at preferential capital gains rates. Nice for him.
2011 - Not yet He filed for an extension for 2011, not unusual for someone having a complicated financial position.
Romney has stated he will release that return . . . sometime later.
All prior years? Fuggedaboutit.
Two years simply does not pass the giggle test. Romney and his advisors know full well that he cannot possibly get away with releasing only two years of tax returns. Most if not all past presidential candidates have released many more years.
Yet they are absolutely stonewalling. Romney has recently falsely accused John Kerry of only releasing two years of income tax data. The number of years in that lie was no accident. They are approaching this like a negotiation. They're opening offer is two years. I am guessing their goal is to settle for a total of five or six. But no more.
Why? Follow me over the fold.
The Romney plan
Romney's tax return disclosure stonewall strategy is part of a well thought out plan.
They are currently attempting to move the 'Overton Window' regarding the appropriate number of years of tax data released by presidential candidates. That's why they are making false statements that John Kerry only released two years of tax returns. He disclosed twenty years.
Romney will continue to stonewall and posture and stonewall. Then, late in the game, the Romney campaign release as few returns as they think they can get away. He'll make a "huge concession" and move from releasing two to releasing five or six.
When they release those five or six years they'll be saying
'Its all out there.'
'There's nothing new.'
'Nothing to see here.'
'Move along.'
And we probably will move along if we don't think harder about this. They will characterize that disclosure as more than adequate - particularly in light of what they are falsely accusing other presidential candidates of doing.
What is Romneys dilemma?
We all know Romney has made a lot of money. What is it that they are trying so desperately to hide?
Is the issue the low tax rate Romney paid, which is likely to be similar to that of the 2010 return? There is no reason to believe the rate in prior years would be much different.
Romney's low rate is already out there. It's legal. A low tax rate would be no surprise. Whatever the political damage arising from the preferential rate he enjoys is done.
A nanny problem? You would probably get it out of the way early so its old news at election time. It has got to be worse.
Romney had a Swiss bank account. It was closed in 2010. Romney has/had? foreign investments in Luxembourg and the Cayman Islands, both of which are well known tax havens.
The tip of the iceberg . . . is it in the Caymans?
Do you have investments/accounts in sunny Grand Cayman Island? I don't. I'll bet you don't. Romney does. Romney's 2010 return indicates a foreign investment account in the Grand Caymans. Why? What might be the significance of that account?
You probably don't remember the details of a 2004 Frontline presentation on tax shelters. You can find it at this link. http://www.pbs.org/...
A segment of this presentation was devoted to uncovering tax shelter schemes. You can find out why Grand Cayman is important in keeping these schemes under wraps at this link http://www.pbs.org/...
There can be little question that Romney gets the best tax advice available from the big international accounting firms and white shoe law firms. Do we know the Caymans account was associated with a tax shelter? No. But he has not disclosed the reason for its existence.
Carried interests equal capital gains
We know that Romney's income is largely from the carried interests since his departure from Bain Capital. That income is capital gain for tax purposes.
Capital gains and 'Son of Boss'
Go to the Frontline referenced above and read or watch the story of Joe Jacobini in the Frontline story. If you want just the gist of it:
Shorter Joe Jacobini
He had a large capital gain
He wanted to avoid the tax on that gain
He hired the best accountants and lawyers
Their plan involved an abusive tax shelter
Their plan employed a Cayman Islands account
Their plan blew up in his face
He paid the tax plus interest and penalties.
The longer Joe Jacobini is in the script of the Frontline documentary at the following link. http://www.pbs.org/... Search the webpage for Joe Jacobini
Romney and 'Son of Boss'
The abusive shelter was known as Son of Boss, which is fully described at the following link. http://www.son-of-boss.com/
It has been publicly reported that Romney is very familiar with and knowledgable about these types of shelters. Links:
http://www.bloomberg.com/...
http://www.son-of-boss.com/...
The IRS declares Son of Boss illegal
Son of Boss was shut down by the IRS in 2000. In 2004 the IRS offered a settlement to those who had engaged in this shelter.
On July 1, 2004 the Internal Revenue Service announced today a strong turnout by taxpayers to settle a tax shelter commonly known as "Son of Boss." More than 1,500 taxpayers filed Notices of Election by the June 21 deadline.
About 85 percent of the taxpayers known to the IRS filed elections to settle. Many of those taxpayers had transactions generating tax losses of between $10 million and $50 million. In several cases, the tax losses claimed were greater than $500 million. About two-thirds of those electing face either a 10 or 20 percent penalty - depending on whether they had been involved in other abusive shelters.
Son of Boss was aggressively marketed in the late 1990s and 2000 to companies and wealthy individuals by a network of law firms, accounting firms and investment banks. In August 2000, the IRS issued Notice 2000-44 declaring the transactions abusive and requiring promoters to maintain a list of investors.
Link:
http://www.son-of-boss.com/...
Connecting the dots
Son of Boss would have been perfect for Romney. Virtually all his income is derived from carried interests and is taxed as capital gain. He could have avoided even the preferential capital gains tax on the carried interest. He could have been paying absolutely zero in tax on a multimillion dollar income by employing Son of Boss or something similar.
Did a tax shelter blow up in Romney's face just like it did for Joe Jacobini? Is that perhaps the reason that they are so adamant about controlling the release of the historical tax returns?
IF . . . Romney had used a disallowed Son of Boss or similar shelter, he probably settled with the IRS in 2004. (If he had litigated, there would be a public record.)
IF . . . the shelter is the reason for all the stonewalling, the behavior of the Romney campaign absolutely makes sense. Further, it would make sense to them to posture falsely about Kerry only releasing two years.
IF . . . Romney used this shelter and had to settle when it was declared illegal, they can only release the returns for tax years subsequent to that settlement without substantial political fallout. That's why I think they will release the last approximately six years, and only late in the campaign so the dots have less of a chance to be connected.
Releasing tax returns where the gains were sheltered by an illegal and abusive scheme and the associated settlement documents would be political kryptonite for Mr. Romney.
Summary and conclusions
Note that I said repeatedly IF he used this shelter.
We won't know what is in Romney's returns until he releases them.
However, the fact that he is not releasing them and the public posturing around that decision leads to speculation.
And that's what this post is - speculation. An attempt to understand the reasons for the strange behavior of the Romney campaign regarding disclosure of the tax returns of a candidate for the presidency of the United States who's very proud of the fact that he makes a lot of money.
The Romney campaign clearly is aware of the potential political damage of exposing these returns. . . if this conjecture is correct. It would indicate that Romney wanted to pay even less than the already low preferential cap gains rate he enjoyed. Absolutely none.
Romney engaged in what was found to be an illegal scheme (when it was uncovered by the IRS) so that he could pay absolutely zero taxes . . . . if this conjecture is correct.
Truth Time
Prove me wrong, Mr. Romney.
Release all those tax returns going back to at least the mid 1990s.
You allegedly showed John McCain 23 years of returns four years ago.
If you only release the last five or so years, we'll be wondering what it is you have to hide in those earlier years.