This opinion piece originally appeared at Reuters.com.
A tax return says a lot about a man, especially one aspiring to be president.
If Mitt Romney makes good on his promise during Thursday night’s Republican candidates’ debate to release “multiple years” of his returns, it will likely stir up rather than calm the political storm unless he makes public all of his returns from 1984 through 1999. Those are the years when he built a fortune of more than $200 million while running Bain Capital Management.
There’s no suspicion that Romney has done anything illegal. But what should be secret about the taxpaying relationship between a presidential hopeful and his government?
Romney himself said late on Thursday: “I’m not going to apologize for being successful.”
The former Massachusetts governor disclosed this week that he pays about 15 percent of his income in federal income taxes. That’s the same effective tax rate as a single wage earner making $60,000. Most of Romney’s income consists of dividends and capital gains, which Congress taxes at 15 percent. Were his income in wages, he would have paid a much higher rate.
Congress requires that most workers have income taxes withheld from their pay, but not so investment partnership managers like Romney, who cofounded Bain Capital Management and ran it for 15 years. They can earn compensation now and pay taxes later, decades later if they want. It’s called “carried interest.”
At the debate Romney wouldn’t say just how many years of returns he would make public. He has yet to share any of them. Before Thursday night, he had spoken only of releasing returns come April, the 2011 tax deadline. He came under public pressure to deliver more.
Unless he releases the tax returns from his Bain Capital years he will surely be pressed about how much, if any, of his fortune has yet to be taxed and how long he deferred paying on the portion that has been taxed. He will be asked about Bain accounts in the Cayman Islands, Bermuda and other tax havens. While perfectly legal, these offshore accounts convey an unsavory political whiff to many people, including some of his rivals for the Republican presidential nomination.
And what about taxes on the $100 million that Romney put into a trust for his five sons. How much Massachusetts and federal income tax, as well as gift tax, was paid on that money?
None of these questions can be answered without the returns from his Bain years.
Romney’s political problems could multiply once families around kitchen tables grasp the fact that while they pay taxes before getting paid, Romney arranged to delay paying his for years. The disclosures could also lead to popular support for ending such deferrals, which President Barack Obama, a Democrat, proposed in 2008 and again in September. Hedge fund and private equity firms have spent a lot of money on lobbying and campaign donations to avert any such change.
Newt Gingrich, a rival for the Republican nomination, released his own tax returns on Thursday to try to embarrass Romney. Gingrich has warned Republicans that Obama’s campaign in the run-up to November’s elections will hammer these tax issues if Romney is nominated. For sure, the Obama campaign would also hammer Romney over any refusal to disclose the full story of his income and taxes going back to 1984. A no-win situation for Romney? Maybe not.
There are presidential precedents that strongly favor disclosure. In March 2008 Obama released his returns from 2000 forward. In 1999 George W. Bush released his 1998 tax return showing how he made $17 million in carried interest from the Texas Rangers baseball deal he managed.
The practice of releasing returns even predates the revelation during Watergate that President Richard Nixon filed four fraudulent tax returns, resulting in felony indictments of two of his tax advisers.
Back in 1968, another Republican businessman seeking his party’s presidential nomination disclosed 12 years of tax returns. That man was George Romney, Mitt’s father, who said it was the right thing to do.