Romney: Opaque and Wishy Washy

Mitt Romney has been running for president for over six years, since his final days as governor of Massachusetts.  He has run for public office three times before.  He won his race for governor in 2002 and lost his race for the Senate in 1994, and for president in 2008.  He was third in the Republican presidential primaries in 2008, measured by number of delegates won, and conceded to John McCain just over a month into the race.

This year it took much longer to settle the nomination.  A number of highly rated candidates, including Jeb Bush, Chris Christie and Mitch Daniels (all successful current or former governors) failed to enter the race, leaving Romney the favorite in a lackluster field.  Yet it was not until April that he finally dispatched Rick Santorum, a militantly conservative former senator from Pennsylvania who lost his re-election bid in 2006 by eighteen points, and Newt Gingrich, a mercurial former Speaker of the House of Representatives who had “more baggage than the airlines”, as a pro-Romney ad memorably put it.

Romney has struggled with the conservative base, which had misgivings about his inconsistent record.  Right-wing pundits dwelt on the fact that he had run for the Senate, and for governor of Massachusetts, promising not to limit access to abortion—but now claimed to be vehemently pro-life.  By the same token, he had supported a regional cap-and-trade scheme to trim greenhouse-gas emissions in Massachusetts before renouncing it late in his governorship.  He now says that the causes and extent of global warming are too uncertain to merit expensive efforts to fight it, especially in such grim economic times.  Above all, he stoked suspicions on the right by championing health-care reforms in Massachusetts that served as the template for Barack Obama’s health-care law, before denouncing Obamacare as an affront to liberty that must be repealed.

In the end Romney prevailed partly by adopting a series of positions designed to please right-wing primary voters.  He unexpectedly unveiled a proposal for a whopping tax cut that the 59-point economic plan he released last year had mysteriously failed to mention. He also developed a fervent opposition to anything that smacked of compassion towards illegal immigrants, chastising both Gingrich and Rick Perry, the governor of Texas, for their supposed lapses in that regard during debates among the Republican candidates. Romney and his supporters also vastly outspent his rivals, blitzing them with vicious advertisements.

Since clinching the nomination, Romney has moved back towards the center in some respects. He has spent most of his time and advertising budget talking about the economy, rather than the more polarizing social issues that often arose in the primaries. He has released a new immigration policy which makes no mention of his call for those present illegally to “self-deport”, but embraces some more cuddly-sounding goals such as reuniting families and making it easier for foreigners to take up seasonal jobs.  He has also pledged to rescind the $716 billion in savings that Obama’s health-care reforms aim to garner from Medicare over the next decade, presumably to curry favor with older voters.

Romney’s advisers, a peculiar mix of zealots and moderates, provide little hint as to where his own instincts really lie.  On immigration policy he has sought the advice of Kris Kobach, secretary of state of Kansas, and the guiding force behind controversial laws in Alabama and Arizona cracking down on illegal immigrants.  On foreign policy he has consulted lots of bellicose neocons from the Bush administration, notably John Bolton, as well as a few more measured voices, such as Robert Zoellick.  Two mainstream academics and former advisers to Mr Bush, Greg Mankiw and Glenn Hubbard, have the most prominent roles on the economic team.

The campaign has unveiled endless “advisory groups” on different topics—with more members than Romney could possibly consult in a lifetime, let alone during a presidential campaign.  It is hard to know whose counsel Romney really values beyond that of his wife, a few former colleagues from his days as a private-equity investor, and his senior campaign staff, many of whom are holdovers from his previous presidential run.  Ed Gillespie, a former chairman of the Republican National Committee and co-founder of the Crossroads groups, which plan to spend hundreds of millions of dollars this year boosting Republican candidates, is also playing a role.

By picking Paul Ryan as his running mate this month, Romney has further muddied the ideological waters.  Ryan, after all, is best known for his efforts to cut spending on entitlement programs such as Medicare—something Romney is now attacking President Obama for.  His selection is widely seen as an effort to enthuse the Republican base, which likes his government-shrinking budget proposals.  Democrats spy an opening: they are drooling at the chance to link Romney with Ryan’s ruthless proposed cuts to things like food stamps and student loans.

One of the most dangerous parts of Romney’s campaign since clinching the nomination is his lack of openness and specificity.  He has refused to make tax returns available, not even going back a measly five years when his father proudly started the practice of making the candidates’ returns public in the 1960’s by releasing twelve years of returns.  What does Romney have to hide?  We know that he had a Swiss bank account and that he has investment funds offshore, both of which smell bad for someone who wishes to be president.  If there is nothing to hide, why not bring everything out into the open?

Also, he has not really provided any specifics on the proposals he has brought forward.  He seems to think that there will be no divided Congress if he elected and that he will be able to make changes by mandate.   More about this problem in future posts.

Take care. 

Romney's Tax Returns

I am posting this article which appeared today on the CNN website because it is vitally important that, with all the super pacs pouring millions of dollars into the campaign, all of the truth comes out and is not buried in propaganda.  Mr. Romney is a super rich man and if he is to meet the threshold of being qualified to run for the office of president, then he must be totally transparent and follow the excellent practice that his father started over forty years ago.   Otherwise he should pass the nomination along to someone else who will be totally open with his or her financial affairs.

Take care.    

Why won't Romney release more tax returns?

By Edward D. Kleinbard and Peter C. Canellos, Special to CNN

Mitt Romney has released only one full tax return so far.

Editor's note: Edward D. Kleinbard is a professor at Gould School of Law at the University of Southern California. He is the former chief of staff of Congress's Joint Committee on Taxation.  Peter C. Canellos, a lawyer, is former chair of the New York State Bar Association Tax Section.

(CNN) -- By announcing that he will release no further tax returns beyond his 2010 and 2011 returns, Mitt Romney appears to have exempted himself from the proud bipartisan tradition of presidential nominees displaying genuine financial candor with the electorate.  What is more, his disclosure to date is in the wrong direction: It is the release of Romney's past returns, not his current ones, that matters.

Since George Romney inaugurated the practice more than 40 years ago by releasing 12 years of tax returns in his bid for the Republican Party nomination, presidential nominees have been transparent with voters about their personal finances.  For this reason, we have not suffered a significant tax scandal involving a nominee or sitting president since President Richard Nixon's abuse of the tax code.  Either Romney has an unresolved father figure issue, or he has some special reason not to follow a tradition established by his father.

Given Romney's financial sophistication, it has been assumed by some that there cannot be any tax skeletons in his closet. His reluctance to disclose past returns, however, undermines that assumption.  We are left with the difficult task of plausibly reconstructing his financial record based on the one full return that he has released.  The result is troubling.

Mitt Romney is extraordinarily wealthy, but that is not a justification for nondisclosure.  He has made no secret of his wealth, and required campaign disclosures already hint at its magnitude. While Romney may have dissembled about when he actually left Bain Capital, he has been disassociated with the firm long enough that he cannot argue that his tax returns will reveal proprietary secrets.

Nor is this just an exercise in financial titillation or gossip.  Disclosure goes to the heart of the truthfulness with which a nominee engages the American people, and it assures us that he in fact has comported himself before the election with the high moral character we associate with a future president.

Romney's 2010 tax return, when combined with his FEC disclosure, reveals red flags that raise serious tax compliance questions with respect to his possible tax minimization strategies in earlier years.  The release in October of his 2011 return will at best act as a distraction from these questions.

So, what are the issues?

The first is Romney's Swiss bank account.  Most presidential candidates don't think it appropriate to bet that the U.S. dollar will lose value by speculating in Swiss Francs, which is basically the rationale offered by the trustee of Romney's "blind" trust for opening this account. What's more, if you really want just to speculate on foreign currencies, you don't need a Swiss bank account to do so.

The Swiss bank account raises tax compliance questions, too.  The account seems to have been closed early in 2010, but was the income in fact reported on earlier tax returns? Did the Romneys timely file the required disclosure forms to the Treasury Department (so-called FBAR reports)?

The IRS announced in 2009 a partial tax amnesty for unreported foreign bank accounts, in light of the Justice Department's criminal investigations involving several Swiss banks.  To date, some 34,500 Americans have taken advantage of such amnesty programs.  Did the Romneys avail themselves of any of these amnesty programs?  One hopes that such a suggestion is preposterous, but that is what disclosure is for -- to replace speculation with truth-telling to the American people.

Second, Romney's $100 million IRA is remarkable in its size.  Even under the most generous assumptions, Romney would have been restricted to annual contributions of $30,000 while he worked at Bain. How does this grow to $100 million?

One possibility is that a truly mighty oak sprang up virtually overnight from relatively tiny annual acorns because of the unprecedented prescience of every one of Romney's investment choices.

Another, which on its face is quite plausible, is that Romney stuffed far more into his retirement plans each year than the maximum allowed by law by claiming that the stock of the Bain company deals that the retirement plan acquired had only a nominal value.  He presumably would have done so by relying on a special IRS "safe harbor" rule relating to the taxation of a service partner's receipt of such interests, but that rule emphatically does not apply to an interest when sold to a retirement plan, which is supposed to be measured by its true fair market value.

Third, the vast amounts in Romney's family trusts raise a parallel question: Did Romney report and pay gift tax on the funding of these trusts or did he claim similarly unreasonable valuations, which likewise would have exposed him to serious penalties if all the facts were known?

Fourth, the complexity of Romney's one publicly released tax return, with all its foreign accounts, trusts, corporations and partnerships, leaves even experts (including us) scratching their heads.  Disclosure of multiple years' tax returns is part of the answer here, but in this case it isn't sufficient.  Romney's financial affairs are so arcane, so opaque and so tied up in his continuing income from Bain Capital that more is needed, including an explanation of the $100 million IRA.

Finally, there's the puzzle of the Romneys' extraordinarily low effective tax rate.

For 2010, the Romneys enjoyed a federal tax rate of only 13.9% on their adjusted gross income of roughly $22 million, which gave them a lower federal tax burden (including payroll, income and excise taxes) than the average American wage-earning family in the $40,000 to $50,000 range.  The principal reason for this munificently low tax rate is that much of Romney's income, even today, comes from "carried interest," which is just the jargon used by the private equity industry for compensation received for managing other people's money.

The vast majority of tax scholars and policy experts agree that awarding a super-low tax rate to this one form of labor income is completely unjustified as a policy matter.  Romney has not explained how, as president, he can bring objectivity to bear on this tax loophole that is estimated as costing all of us billions of dollars every year.

The U.S. presidency is a position of immense magnitude and requires a thorough vetting.  What the American people deserve is a complete and honest presentation by Romney of how his wealth was accumulated, where it is now invested, what purpose is served by all the various offshore vehicles in which he has an interest and what his financial relationship with Bain Capital has been since his retirement from the company.  These are all factors that go to the heart of his character and values.

For a nominee to America's highest office, a clear and transparent reporting of his finances should be nothing more than routine.