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Sunday, October 23, 2016

The real question isn’t whether Mitt Romney paid his taxes. It’s whether we want to make an unfair tax code even worse.

Republican presidential nominee Mitt Romney last week promised ABC News he would “go back and check” whether he had ever paid a tax rate lower than 2010’s 13.9 percent. He hasn’t, and the questions keep piling up. This week Senate Majority Leader Harry Reid repeated a rumor, attributed to a former Bain partner, that Romney had paid no taxes for 10 years. And in the New York Times on Tuesday, Michael Graetz, a former official in the first President Bush’s Treasury, speculated about what might be in the returns. It’s possible we’ll find something in Romney’s taxes that’s disqualifying or suggests that he broke the law, but I doubt it. We’re unlikely to learn anything about Romney from his tax returns that we don’t already know – that he’s a very rich man with a taste for cutting-edge financial engineering. It’s what we’ll learn about taxes that might shock us. The Romney tax returns are a rare opportunity to see how the tax code really works for the very wealthy and whether we want to change it in the direction that Romney has proposed or take it in the direction of real fairness and efficiency.

Let’s start with the possibility that Romney paid a tax rate much lower than 13.9 in some years, or something in the low single digits. Graetz says that’s “plausible” but might be “perfectly legal.” If he did, he would probably have to show real losses on his investments, which would offset his gains. These might be “capital loss carryovers” from previous years. He had a $4.5 million carryover on his 2010 taxes, from which NYU professor Dan Shaviro inferred that he probably had more losses than gains on his 2009 return – that is, he had to “carryover” the extra losses to the next year. If so, it’s possible that he paid very little in taxes in 2009 – a bad year on the stock market – because he lost money. It’s hard to see that as a problem, though. If Romney really lost money, he had no gains to pay taxes on.

But this also reveals another way in which the tax code benefits those whose income comes from investments: they are able to move their gains and losses around and use the losses when they need them to offset their gains. Most of us can’t do that. With a couple of exceptions, as our income goes up and down, we can’t move deductions that we couldn’t use in one year and carry them over to another. We can’t use our bad years to offset the good ones.

And then there’s that massive Individual Retirement Account, valued in his financial disclosure at between $20 million and $101 million. How does that happen? Contributions to that type of IRA are limited to $30,000 a year, so these are remarkable returns. (The average IRA has about $67,000 in it.) The answer is that he’s not putting cash in the IRA; he’s putting in stock. The trick is to put in stock that has a low value but a huge upside. Graetz says that “we have to presume that Mr. Romney valued the assets he put in his retirement account at far less than he would have sold them for.” Apparently this is not uncommon – if you had just founded Facebook, for example, you could load up your IRA with shares when they were valued at $1, and then as the company grew, the capital gains would be tax-deferred in the safety of the IRA. As Graetz says, “The IRA also allows Mr. Romney to diversify his large holdings tax-free” – by which he means that if you want to have a typically diversified portfolio of high-risk/high-return investments and low-risk ones, by putting the high-return stocks into the IRA, you keep all the capital gains in that tax-deferred space. (I say tax-deferred rather than tax-free because eventually the gains are supposed to be taxed, depending on whether the Romneys withdraw funds from it or pass it on to their heirs.)

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Copyright 2012 The National Memo
  • What it tells me is that we must eliminate all the tax loopholes that allow corporations and multi-millionaires to pay little or nothing on the money they make. Judging by what happened in the Reagan era and, especially, what happened since the tax rate for the wealthiest Americans was lowered to its lowest point in history, it should be obvious to everyone that trickle down is just a chimera.

  • William Deutschlander

    What Romneys tax returns would reveal is that Romney, unlike “you people”, is able through creative accounting, to manipulate his income to avoid taxation.

    What Romney did in the so called Capital Market, was to manipulate the assetts of the companies they took control over, in a manner that allowed Romney / Bain, to extort (remove) that capital (money) from the company to the Bain Partners personal accounts, which they deposited in offshore personal accounts, that avoided United States taxation.

    You ask how? The Ultra Wealthy (top 2% of wealth in U S A), have lobbied for years and have been able to influence Senators and Representatives, including Presidents, to modify the Tax Code in a manner that provides them great benefit to avoid taxes on unearned (not wage) income. “You people” do not have such opportunities since “you people” must file W2 forms with your income.

    Thank you Ann Romney for helping me define the 98% as “you people” who really do not much matter in Republican Cartel circles or to the GOP Syndicate.

  • Romney’s dancing horse (Olympic Dressage Entry, Rafalca) is legitimately part of Ann Romney’s therapy for MS. I appreciate that and hope that Mrs. Romney benefits from her association with the horse in dealing with that serious disease.

    What I do not appreciate is that the Romney’s take $77,000 dollars a year as a medical deduction for the upkeep of this mare. I have not been able to find out the original cost of the animal but I am sure that was deducted also. These horses bring a minimum of 6 figures when sold.

    If anyone deducted the cost of maintaining a pet as being beneficial to their chronic depression they would be locked up.

    If anyone deducted the cost of a vacation as needed relief from stress they too would receive a visit from the IRS.

    • dtgraham

      He didn’t even take Rafalca’s costs as a medical deduction David. It was taken as a business deduction. There is no New England journal of medicine “horse therapy” for multiple sclerosis that I’ve been made aware of. That horse cost Romney $500,000 dollars and similar Dressage horses can cost up to one million dollars, not to mention all of the other incredible costs associated with the horse and the sport, period. This is a breathtakingly expensive “sport” and to claim that Dressage is a legitimate MS therapy for Anne Romney is vomit inducing.

      • Revcarrie

        Horse riding is routinely used for therapy with not only MS but Muscular Dystrophy as well. The riding stables are generally run as nonprofits and include older horses with volunteer help to care for them. The Romneys have chosen to take advantage of the tax codes for such things. The other 98% of us who need this type of therapy have rescued animals to help us out.

        I happen to have a diabetic service dog. My first one was a rescued dog and served me very well for 12 1/2 years. He kept me alive when I was having a diabetic problem. Unlike the Romney’s my service dog is here to serve me and medical needs and NOT MY TAX RETURN. Mrs. Romney would NOT have her horse being used in the Olympics if she was a TRUE service animal. She would be riding the mare herself EVERY DAY if it was a true service animal. The action of riding and the movement and grip of the leg muscles with a horse is very theraputic for leg problems of all sorts including MS and MD and with the horse carrying the body weight . A thigh reducer will do the very same thing and cost about $30 and stores in a closet.

        The care of service animals IS tax deductable. It is the EXTREME to have an expensive horse with Romney type care. Still another 1-2 percenter thing to do for the Romneys.

        My dog lives our lifestyle and loves it. He is with me 24/7 and is an everyday and every minute part of my exitance. He IS a true service animal.

        • dtgraham

          There’s nothing wrong with taking your wife out to riding stables a couple of times a week for a little leg muscle workout, even though there may be a number of other equally good options as you point out. The Romney people are trying to portrait Dressage as the latest medical advancement and breakthrough for MS or something. The reason is because the Dems are trying to do to Romney what the Repubs did to John Kerry in 2004 with his windsurfing, and they know it.

          A horse may be therapeutic in some ways, but it’s hardly necessary for MS treatment and Dressage being needed is a sick joke.

          A used windsurfer can be bought for $300.00. The thing floats. You throw it on the water, get on, and hope for some wind and a wave. If Kerry could be made out to be seen as hoity toity (to quote Charles Krauthammer), then they know the vulnerable position that they’re now in with Dressage. Any connection that’s made, whatsoever, with Rafalca and that “sport”, to Anne Romney’s MS therapy should be loudly ridiculed by the Democrats.

          • Revcarrie

            This Republican thing would be funny if it wasn’t so serious. You are right when they critsized Kerry and the wind boarding and now the whole thing has backfired on them with Ann Romney’s horse. If it is true that the horse’s expenses are being taken as a business expense, it raises even more eyebrows and questions….like there weren’t enough already when the sympathy card is being played for the MS factor as well. The horse was transported over to England for the Olympics which is a MAJOR expense. Why? What did the Romneys expect to gain by doing this? This also means that Ann Romney was probably without her “therapy” for at least two weeks. There is Muscular dystrophy and MS in my family. We can’t go two weeks or more without our physical therapy whether it be swimming or something we do at home. What kind of fools do the Romney’s think we are out here?
            Everything they do seems to be for showboating purposes which backfires with most of us.

  • We need to see tax returns so we see the loop holes being used and ensure our elected officials CLOSE them. The other we need to see so we can learn how Romney accomplished the following:
    It was reported in the Wall Street Journal by Mark Maremont that According to Romney’s disclosure documents, the candidate has between $20.7 million and $101.6 million parked tax-free in his IRA . There are limits to the amount of money individuals can contribute to their IRAs. Before Romney was elected Massachusetts governor, federal law capped annual pre-tax IRA contributions at $2,000 and annual 401(k) retirement contributions at $30,000 with a company match. How did Romney’s IRA get so high?

    When he wanted to be McCain’s running mate he provided the campaign 24 years of tax returns. Doesn’t running for President require at least 12 years?

    • Gammaanya

      Truly Mutt did not provide his taxes for all to see, he only showed to McCain.I own CPA buisness (and 2 diff.businesses), unfortunately, out tax code favors the richmore than poor. Next tax now ill scale down to 5 instead of 6 and goes up by 5% for us and 3.9 for the rich. I did not get the details yet, but Obama is already letting you know YOUR taxes are going up. It was OK under Bush. By the way some of you have selective memory, Bush gave $300(single) or $600 (family) stimulus checks. Did they tell you how much the rich got – TAX BREAKS,were their stimulus. NOW YOU SEE WHO IS BENEFITING FROM REPUB.. ADM. for all these years. How far did your 600 bucks got you??? and is gone in a day right?? How much stimulus was given to the rich and how far did they go with it.?? Straight to the banks off shore and created NOTHING. Stimulus in a form of tax breakes do not create jobs – SUPPLY AND DEMAND DOES. If you have products to sell and everybody wanted you got a business but if you have crap and nobody wants you are going down.
      Al I can say is this.
      If Mutt wins and the Rep/Tebaggers gets COntrol fo Senat IO GUARANTEE YOU, – Mutt and Ryan and all of them will push for privatization of SS (cash cow for them), dismantle Medicare (5-6K vouchers – you run out of money -die – like R. Pauls and others said), dismantle Medicaid (one can not be woth out the other), tax breaks for the rich will be PERMANENT – Mutt said so himself – Koch Bro, Adelson and all , get best ROI.
      It’s only in AMerica. Would love to see their donated money go to waste. That would be a big win for the Middle class, but knowuing the MC, they will commit suicide by voting for Mutt and Ryan.

    • ClydeMcWhorter

      It only requires What the voters accept!!!

  • The tax code is the epitome of the golden rule. Those with the gold rule. The tax code system is designed by the rich, of the rich and for the rich. Are we suppose to believe that anything will be changed by a bunch of wealthy bureaucrats in Washington? The game is rigged to keep the rich and powerful at the top and they intend to keep it that way.

  • It just adds insult to injury! They are ALREADY Richer than Croesus yet they want more, More, MORE at the expense of those you have LESS, and Less and less!

  • bcarreiro

    If we saw his taxes it would be edited for content…….”this guy” is a joke and just keep your 2 cents to yourself.

  • Bright Quang

    The American leaders have paid the twenty percentages of the tax, as like Mitt Romney has done. The poor American people ought to pay the thirty percentages of the tax.
    If Mitt Romney will be become an American president what does he service for his American people?

  • DurdyDawg

    Hard-Earned money my ass hairs.. Easy manipulated riches is what I call it, but you got to have enough money in order to achieve this status.. Good thing Mitt’s old man left him enough to get started and with his sharkonious mind, he did the easy part.

  • michaelnola

    The claim that whatever people like Romney do to avoid paying taxes is OK because it’s legal is irrelevant. If rapists had the political pull that the rich do, they could leave their DNA at the scenes of all the sexual escapades without fear of imprisonment also.

  • bigspender7

    I won’t hold my breath waiting for Romney to do the right thing. Personal ambition is the only code he follows. Say anything, doing anything, stand for nothing — is the Romney mantra.

  • J.

    I would be more interested in Harry Reid’s tax returns and the rest of congress. If you want to pick on Romney for coming out with the same amount of returns that Jimmy Carter did I suppose that is fine. If you are concerned with tax evasion then you should be screaming for Charly Rangle to be kicked out of the Democratic controlled house first. Also why do we want punish the successful (Romney) and reward those who have given nothing back (the president) I want the successful person running my country not the dude that never had a job. I am all for fixing loop holes but should we punish people that are taking advantage of the rules congress passes? Also a quick search of my college library data base shows 96, 551 articles relating to horse therapy not sure if any are New England Journal of Medicine.

    • Your ignorance of facts is showing. Obama taught law courses at the University of Chicago Law School. He was a Lecturer from 1992 to 1996. In 1996 he became
      a Senior Lecturer, which is considered a member of the Law School Faculty and regarded as professor. BTW, he received a pay check while doing so. Now perhaps you don’t consider teaching a ‘job’ which would be an insult to the hundreds of educators throughout the country. The period of time he was a Senior Lecturer was from 1996 until 2004 when he got another job in government.

    • jarheadgene

      Did you not read anything previous? Quit changing the subject and trying to spotlight everything else but this article…..ROMNEY doesn’t GIVE BACK…he takes and he takes and he takes. DO YOU SERIOUSLY THINK…he will even give a moment to changing the tax code? Why would he kill his golden goose? Anyone who does not make $250K a year has absolutely no business voting for ROMNEY.

    • ClydeMcWhorter

      dear J. Quit watching FOX news, and Rush BimBough. Is the $77,000.00 deduction, a medical deduction, or a business deduction??

  • Top

    Until your article addresses the fact that 49 percent of Americans paid NO income tax in 2011, you are barking up the wrong tree. We live in a society where people want something for nothing – roads, healthcare, public schools, police and fire department protection – and nearly half are paying NOTHING into the system? Perhaps you should change your focus from those who pay millions every year to those who don’t pay one thin dime.

    • huh?????…are you implying that unemployment is at a whooping 51%?

      • ClydeMcWhorter

        Are you a natural blonde?

  • ClydeMcWhorter

    the only way to reform the tax code is to repeal the 16th admendment to the US constitution.