PLANK AUGUST 9, 2012
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The latest journalist to press Mitt Romney on his tax returns is the ultra-resourceful Josh Tyrangiel of Businessweek. Here’s how he cleverly posed the question in a recent interview:
If you’re an investor and you’re looking at a company, and that company says that its great strength is wise management and fiscal know-how, wouldn’t you want to see the previous, say, five years’ worth of its financials?
Alas, no dice. Romney’s response:
I’m not a business. We have a process in this country, which was established by law, which provides for the transparency which candidates are required to meet. I have met with that requirement with full financial disclosure of all my investments, but in addition have provided and will provide a full two years of tax returns. This happens to be exactly the same as with John McCain when he ran for office four years ago. And the Obama team had no difficulty with that circumstance. The difference between then and now is that President Obama has a failed economic record and is trying to find any issue he can to deflect from the failure of his record. Thanks, guys. Goodbye.
The conventional wisdom on why Romney won’t release more than two years of tax returns was shaped by George Will, who now-famously posited: “The cost of not releasing the returns are clear. Therefore, he must have calculated that there are higher costs in releasing them.” Since then, the speculation has produced three basic theories. The first, which Tyrangiel’s Businessweek colleague Josh Green laid out most elegantly, is that Romney paid little or no taxes in 2009, which voters might find a bit infuriating for a guy worth several hundred million dollars. As Green writes:
When the stock market collapsed in 2008, the wealthiest investors fared worse than everyone else. (See, for instance, this Merrill Lynch study.) The “ultra-rich”—those with fortunes of more than $30 million—fared worst of all, losing on average about 25 percent of their net worth. …
As a member of the ultra-rich, Romney probably wasn’t spared major losses. And it’s possible he suffered a large enough capital loss that, carried forward and coupled with his various offshore tax havens, he wound up paying no U.S. federal taxes at all in 2009.
Green goes on to point out that 2009 is really the only Romney tax-year almost no one knows anything about, since he released 20 years’ worth of returns to John McCain’s vetters—and McCain aides have assured us they were kosher—and has released at least part of his returns for 2010 and 2011. (Depending on what Romney knew and told McCain about 2008, that year could also be opaque, but this doesn’t change the basic point.) That 2009 would be the sticking point affirms the idea of a financial-crisis-related story.
The second theory is based on Romney's enormous contributions to the Mormon Church over the years. While he is personally proud of his financial support for the church, the theory concedes, he is deeply uncomfortable discussing his religion in public. As John Heilemann, the father of the theory, puts it:
[F]or a candidate who has taken extravagant pains to avoid discussion of his supremely prominent role in contemporary Mormonism, the idea of a wave of news stories detailing the tens of millions of dollars that he has given to the Church of Jesus Christ of Latter-day Saints—surely making him among its most generous funders in the modern era—must be a kind of nightmare.
The final theory is a bit more sinister, holding that there’s something in Romney’s 2009 returns that isn’t just politically inconvenient but which approaches illegality. One possibility is that Romney tried to beat a late 2009 IRS amnesty deadline for Americans with money stashed in tax havens. According to this Los Angeles Times piece from October of that year, interest in the amnesty program skyrocketed after the Swiss bank UBS settled with the U.S. government, which had accused it of participating in a multi-billion-dollar tax-avoidance scheme. The settlement threatened to expose a lot of rich tax-evaders who had previously assumed the Swiss would keep their yaps shut. As Matt Yglesias explained it a few weeks back:
Romney might well have thought in 2007 and 2008 that there was nothing to fear about a non-disclosed offshore account he'd set up years earlier precisely because it wasn't disclosed. But then came the settlement and the rush of non-disclosers to apply for the amnesty. Failing to apply for the amnesty and then getting charged by the IRS would have been both financially and politically disastrous. So amnesty it was.
(Say this for the amnesty theory: It would provide ironclad evidence that Romney wasn't planning to run for president in 2012!)
Relatedly, the former Bush I Treasury official Michael Graetz has dismissed the idea of a Swiss tax shelter (“He is far too smart for that”) but speculated that Romney may have questionably valued the assets in his IRA accounts and in a trust for his children in order to avoid millions in tax payments. Or that he used his Cayman Islands vehicle to elude certain IRA taxes.
None of these theories would shock me if true, but they all strike me as problematic. Yes, paying zero taxes when your net worth is upward of $250 million isn’t something to trumpet. But, if paired with the primary explanation—Romney lost tens of millions of dollars during the financial crisis—it hardly seems scandalous. The Mormon explanation has a ring of characterological truth—it just sounds like Romney! The problem is that we already know Romney gives eye-popping sums to his church based on his 2010 tax returns. Even if it turned out that, say, he wrote a $10 million check to build a new temple in Belmont, it doesn’t strike me as qualitatively new information.
If I had to put money on this—on which, I can assure my friends at the IRS, I would most certainly pay taxes—the tax-amnesty/legally-dubious-tax-avoidance theory sounds most plausible. What else would make it worthwhile to stonewall? But even this theory has flaws. For example, if Romney applied for amnesty in 2009, that means the account existed for some time before then, and the McCain campaign should have flagged it. (On the other hand, Romney could have told them it was perfectly legitimate, only to get squeamish when UBS settled. Or not disclosed it at all, as Yglesias suggests.) Likewise, wouldn’t the McCain vetters have picked up the aggressive asset-valuations and Cayman Island hijinks that Graetz describes?
Which is why I wouldn’t rule out a fourth theory: garden-variety rich-guy haughtiness. It wouldn’t shock me if Romney believes that, having earned his money legitimately, and having paid all the taxes he was legally required to pay, questions about his tax returns are simply beneath him. Nor would it shock me if his campaign advisers, while clearly aware of the political damage his refusal is inflicting, have learned that you simply can’t budge the boss on matters of personal pride and dignity. And so they’ve given up.
Like the other Romney tax-return theorists, I obviously don’t have a smoking gun. But I’ve spent a decent amount of time chatting with Romney officials these last few months. And on several occasions I got the distinct impression that there were simply places a Romney aide—even very senior and trusted aides—can’t go with the candidate, at least beyond the most gentle prodding. One of those places is credit (the figurative kind, not financial). As several aides told me, Romney insists on being known as the co-writer of all his speeches. Now, that may reflect reality. But, you know, who cares? Why make it a red line? It suggests a certain prickliness. Another of those places is Ann. A campaign official I spoke with shuddered at the idea of offering tactical advice involving the candidate’s wife. General questions of money and wealth—before you even get to taxes—are yet another of these deeply-fraught subjects.
(An aside: I don’t think Mormonism actually falls into this category. While running for U.S. Senate in 1994, Romney was quite open in discussing his faith in an attempt to educate the public. But the campaign felt that this did them no good—the only thing voters took away was that Romney was a Mormon, a religion they were otherwise ignorant of. So Romney and his advisers made a strategic decision to discuss it as little as possible going forward.)
Now, I’m not suggesting that haughtiness is the entire story. Romney is a fundamentally rational man. If his aides make a case that he can’t win unless he does X, he will likely do X even if it causes him some personal angst or embarrassment. But I can certainly imagine that the dynamic I’m describing has skewed the internal conversation in unhelpful ways. For example, it may well be that Romney’s returns show some aggressive but politically non-lethal tax-minimizing, which campaign aides might prefer to reveal in order to put the issue behind them. (McCain’s aides may have felt the same way.) But because of their squeamishness about broaching this stuff with Romney, the discussion never gets very far, and so the release doesn’t happen. Given what I know about Romney and his campaign, that seems entirely plausible (though I have no direct knowledge of it). And, if I’m right, it must be absolutely maddening for the people who have to take bullets for him day in and day out.
Update: A number of readers have missed the key point of my item--what makes it a "unified" theory--which probably means I didn't explain it well enough. The point isn't that Romney's taxes are immaculate and he just won't release them on principle. The point is that there's probably some pretty unsightly stuff in there, but not so bad that it would destroy his presidential hopes, and his aides just can't persuade him to come clean.
I imagine it being a kind of 55-45 decision: The pure political calculus is that he should release the returns to put an end to the hemorrhaging. But there are going to be details in the returns that cause him a lot of short-term, non-fatal pain and embarrassment. With a candidate who was more approachable on these matters, his aides could make their case frankly and get to the right outcome. (As Mike Tomasky has suggested, we'd probably see enough to qualify as "disclosure" by some definition, but not close to every page.) With Romney, I imagine the conversation is so awkward and uninviting that it just never goes very far. Maybe the aides broach it a few more times as the political pain escalates. But I doubt if they ever get to make the full, unvarnished case. And so the returns never get released.
Follow me on twitter: @noamscheiber
27 comments
That doesn't satisfy the question of why he's hiding something if he has nothing to hide. The Tea Party has already ruled that laws and standards for releasing information are relative, demanding BOTH of his birth certificates, not just the one the federal government had been using to verify his citizenship for his entire life. If he doesn't aquiesce to these demands, it just proves that Tea baggers are racists after all. More importantly, is this an indicator of how he is going to govern? Invade Russia or China, then tell Americans to screw off if they don't like it because he's the commander in chief and he can invade countries whenever he wants?
- GSpinks
August 9, 2012 at 4:47pm
my point was that he has *something* to hide, just not so much that he wouldn't be politically better off if he came clean. but that won't happen because he sees it as an assault on his dignity, and his advisers won't challenge him.
- Noam Scheiber
August 9, 2012 at 4:51pm
There are two ways we can prepare our presidents for the (run for the) office. One, like the Orthodox Church, from childhood. The other, our way, is not to prepare. I prefer the latter. Even if the two contenders represent the former and the latter.
- rayward
August 9, 2012 at 4:58pm
A lot of things could be in Romney's returns. For instance, the Romneys took Rafalca as a business deduction, although Romney's supporters have defended the $77,000 deduction as a medical expense to help Ann Romney's M.S., which means it is a medical deduction that would be knocked out by the 7.5% AGI reduction for medical expenses. The question of whether something is a true business expense is frequently disputed by the IRS and horses are more likely a hobby. Also, Romney's tax returns highlight his conflict of interest in advocating tax cuts for himself.
- Nusholtz
August 9, 2012 at 5:10pm
I don't know why he would be so staunch on this issue, even if he is a rich, haughty guy. He has repudiated every other position he has ever taken in life. If there wasn't something really bad in there, I'd think he'd happily roll over like he does for everything else.
- XLProfessor
August 9, 2012 at 5:14pm
Even better, have a POTUS who might start a war because his dignity was assailed. (Oh, the humanity!) If that's the case, we'll be at war with Iran and China by the end of his first year in office.
- GSpinks
August 9, 2012 at 5:25pm
Maybe the publication of portions of Mr. Mitt's tax returns would lead to the elimination of certain US tax loopholes. Is that something any one would like to be associated with? The Mr. Mitt tax reform act? Another possible theory is that the tax returns establish associations between Mr. Mitt and people who will be nominees for government appointments. It's always better to curse the darkness than light a candle.
- Doug12
August 9, 2012 at 5:43pm
Along with dubious tax shelters, I'm guessing there are also significant investments in companies in Iran, China, and Russia. The latter two are perfectly legal, but won't go over well with the xenophobes in the GOP base.
- krlong014
August 9, 2012 at 8:50pm
Hauteur is not a plausible explanation. The guy wants to be president. This is jeopardizing his chances. There has to be some very politically embarrassing information there, likely related to offshore investments and/or highly questionable deductions.
- roidubouloi
August 9, 2012 at 11:20pm
Like so many others, Tim isn't asking the most obvious question, namely where is McCain on all this. McCain could put this to rest with one simple statement: "We looked at 23 years of Romney's taxes. Romney paid taxes - a lot of them - every year. Harry Reid is lying." It's just remarkable that so few people are asking why McCain doesn't do this, especially when he had an opportunity to do so on Anderson Cooper the other night. His response is remarkable. He's clearly not saying Reid's lying, just wishing Reid would shut up, because it's just not nice: http://www.cnn.com/video/?/video/bestoftv/2012/08/02/ac-mccain-harry-reid-romney-taxes.cnn Also, as I noted in a post on Noam's thread on the subject, do you really think the Obama campaign would let Harry Reid continue pushing this day after day if it didn't think he was right? Chicago's not stupid. The fact that they just released an ad in tune with Reid's accusations suggests that they know Reid's "rumor" is fact. It's just too big a risk. Why give Romney the opportunity to reveal his tax returns and show he was completely above board on everything? No, they're going for the kill on this, as they should. Come on, Tim, think a little harder.
- bhunziker
August 10, 2012 at 7:45am
Like so many others, Tim isn't asking the most obvious question, namely where is McCain on all this. McCain could put this to rest with one simple statement: "We looked at 23 years of Romney's taxes. Romney paid taxes - a lot of them - every year. Harry Reid is lying." It's just remarkable that so few people are asking why McCain doesn't do this, especially when he had an opportunity to do so on Anderson Cooper the other night. http://www.cnn.com/video/?/video/bestoftv/2012/08/02/ac-mccain-harry-reid-romney-taxes.cnn His response is remarkable. He's clearly not saying Reid's lying, just wishing Reid would shut up, because it's just not nice: Also, as I noted in a post on Noam's thread on the subject, do you really think the Obama campaign would let Harry Reid continue pushing this day after day if it didn't think he was right? Chicago's not stupid. The fact that they just released an ad in tune with Reid's accusations suggests that they know Reid's "rumor" is fact. It's just too big a risk. Why give Romney the opportunity to reveal his tax returns and show he was completely above board on everything? No, they're going for the kill on this, as they should. Come on, Tim, think a little harder.
- bhunziker
August 10, 2012 at 7:46am
I have to agree with roid. It it hard to imagine someone who has brought pandering to a new level standing on "principle" -- even one of "personal dignity" -- where doing so is unquestionably at great political cost. Dhurtado
- NR143296
August 10, 2012 at 7:51am
The difference between then and now was that McCain wasn't running as a "successful Businessman", and wasn't running in the middle of a major recession requiring some economic intelligence. Romney is doing both. Consequently, anything we can get our hands on to prove he really WAS a "successful businessman", and HAS some "economic intelligence" would be a good thing. Frankly, his campaign so far has proven nothing of the sort. His "successful business" was based on buying out other struggling businesses, and downsizing or outsourcing them, reaping payments when or lose. Or his rescuing of the Utah Olympics, through garnering a Federal Loan. Thus we add the strong suspicion that he really IS NOT a "successful businessman", and our desire to see his tax-returns to prove it one way or the other.
- AllanL5
August 10, 2012 at 8:18am
Perhaps Romney can solve the transparency problem by appearing naked in public. Or, if not that, clothed only in his past tax returns, with Nancy Pelosi authorized to examine them closely.
- skahn
August 10, 2012 at 9:00am
Assume that AFTER he showed all his returns to McCain in 2008, he sold a lot of losing investments, leaving him with a huge loss for 2008. So big, and so far in excess of his income for 2008, that it generated a massive tax loss that could be carried back two years and carried forward for up to 20 years. He could conceivably have amended his returns for 2006 and 2007 to carry back the loss and show no tax liability, and he could show no liabiklity for 2008, and even have some left for 2009.
- Mikelawyr22
August 10, 2012 at 9:10am
"Yes, paying zero taxes when your net worth is upward of $250 million isn’t something to trumpet. But, if paired with the primary explanation—Romney lost tens of millions of dollars during the financial crisis—it hardly seems scandalous." I dunno, isn't part of Romney's selling point to Americans is that he is a financial and business wizard who will help America much more than the average guy who is out of his depth in the White House? Losing tens of millions in the financial crisis just means that Romney is no better than the ordinary investor who uses Merill Lynch or Charles Schwab to help pick his stocks and mutual funds - it's just that his losses are in the millions while the average person's losses are in the thousands. Now, if Romney had switched all of his holdings to gold and diamonds in 2009 and made ginormous profits while the rest of the market bled a quarter of its value, THAT would be something to be proud of!
- wildboy
August 10, 2012 at 10:36am
How do you know that the twenty years of returns he showed McCain really had no problems? They did not pick him, after all. Perhaps there was something there that forced them to pick some other person who seemed to kill their chances. Perhaps the McCain people just say there was nothing there out of loyalty to Republicans.
- bwickes
August 10, 2012 at 10:40am
Is it reasonable to assume that the McCain campaign people are telling the whole truth when they say there were no problems with Romney's pre-2008 returns? We would have had independent, objective evidence that they felt the returns to be clean, if they had actually chosen Romney as the VP candidate. Without that outcome, it's an unsubstantiated claim.
- nanoprof
August 10, 2012 at 10:58am
I think this post gives too much credit to the vetting by the McCain team of Romney's taxes. Several points: One, the Sarah Palin pick certainly raises questions about how thoroughly they vetted anyone. Two--even if you give a pass on one--I doubt McCain ever seriously considered Romney (whom he pretty obviously couldn't stand), so probably Romney was on the list of potential VPs for cosmetic reasons, and the vetters knew that and didn't focus on him. Three--20 years of returns? This sounds like overkill, and I suspect it may be much less than it appears to be...maybe Romney provided very abreviated material--a sheet or two of the 1040--to the McCain people, because (going back to point two) both sides knew it was pro forma. There is a kind of meta point about Romney's taxes which people sometimes mention, but I think is worth considering at more length. It is hard to imagine that anyone intending to run for President doesn't think about having to release his taxes, and Romney certainly made these kinds of calculations in certain cases ("For pete's sake, I can't have illegals working on my yard"). Yet he still apparently did something in his taxes that makes him reluctant to release them--in other words, he consciously chose a course of action that could have the result of losing him the election. (Obviously the election will turn on many things, but the issue of his personal taxes is part of what is defining the popular perception of him, and that perception, at this point, seems to be hurting him rather than helping.) Again, in other words, he made a decision that substantially affects whether he will achieve what is probably his life's dream, and chose something that reduces the likelihood of that--all for a relatively small increase in his already vast wealth. What does that say about his judgment?
- clarson
August 10, 2012 at 11:31am
It's all speculation of course and we'll never know anytime soon, if ever. I don't think "hauteur" quite expresses it. I think it's that combined with the point Scheiber makes about, speculatively stipulating no illegality, there being such a wealth of tax avoidance detail, such a treasure trove of riches for ads and bad characterizations, that a strategic impulse is married to the high personal disinclination. My guess is that the calculation is not precisely that of stated by George Will. Rather, more nuanced, it's that "I really don't want to"+ the drip, drip, drip, drip of issues and ads relating to all the particulars of disclosure = a more weighty consideration than the hit for not releasing them. Plus, Romney gets an arguably perverse, mild plaudit for actually sticking to his guns on the point come hell or high water.
- basman
August 10, 2012 at 11:37am
Hello basman, I think the "wealth of tax avoidance detail" is precisely the problem, combined with a distinct penchant for investing elsewhere than in America. All of this would be devastating politically, which is why I think Romney chooses to endure the speculation rather than release his returns. I do not exclude the possibility of hidden Swiss income/assets on which Romney did not pay taxes and his taking advantage of the amnesty. This seems incredible for someone with presidential ambitions, but these people have an even more incredible sense that they can do what they want with impunity. Just look at John Edwards. Or Leona Helmsley. If Romney did break the law, then, with the Swiss agreeing to breach bank secrecy in settlement with the US tax authorities, his only path to the presidency would be to take advantage of the amnesty and then stonewall on releasing his returns. Of course, there is no shortage of hauteur on Romney's part. He no doubt considers himself above the constraints that bind ordinary people. But I don't think he would take such political punishment primarily for that reason. He probably uses his self-importance to justify his decisions to himself and believes that, even if he broke the law, it would be "unfair" for him to be skewered politically for it. Such a small matter for someone as rich as he.
- roidubouloi
August 10, 2012 at 1:02pm
Hello to your own self Roi, I've been missing your excellent presence here. You make a good case in point with Edwards, but he is such a one off schmuck that he is, in respect of his undisciplined egocentric wildness and impulses, the precise antithesis to the ever so self controlled Romney, who thereby earns the metaphor robotic. What's with the doctorate?
- basman
August 10, 2012 at 1:22pm
Thanks for asking. I took a semester off from class in order to prepare for the qualifying exam in macroeconomics. Happily, I passed, which means that I have now earned a masters of science in economics. This is a courtesy degree awarded 3/4 of the way through the doctoral program when you pass the first of two qualifying exams. I have five courses, one qualifier, and a dissertation left to go. Probably about two years at my slow pace, perhaps a little bit longer. I do find that my understanding of things I read about economics, whether I agree or disagree, is quite different in nature from when I started out. It makes a big difference to have a much wider context within which to place particular economic claims. So, it has been worth it personally. What I will do after I get the thing, I really don't know. Shabbat shalom.
- roidubouloi
August 10, 2012 at 5:01pm
One should never underestimate the sense of entitlement of the über-rich.
- roidubouloi
August 10, 2012 at 5:02pm
If businesses are people, aren't people businesses? Ergo, Romney is a business. Poorly run, but a business nonetheless. Regardless, burnssean makes a good point: Romney isn't just influenced by his advisers. He's also influenced by other powerful business people and media leaders, and they haven't proven shy about taking him to task. I am surprised he hasn't caved, which makes me think there is something deeply damaging in there. My guess it's tax losses that led to no tax paid. Contrary to Noam, this would be incredibly damaging. Regular people lost their houses and jobs, but they still had to pay taxes on their income a couple of years later.
- polcereal
August 10, 2012 at 5:15pm
I know some guys, not a few, who have some goodly bucks, but I've never met anyone I'd consider über rich except for one guy worth about a quarter billion dollars, and who used to be great friend of mine before we drifted apart, me having a long time ago moved to a different city and so forth. But he came up hard and started with so very little and is by his inveterate nature so down to earth, that his sense of entitlement does not exceed his clear understanding of what he can wield by reason of his wealth, which is, I think, a different proposition than the hauteur--good word--of many to the manor born. Good on you for your ongoing success in your doctoral studies. Your diligence and hard work in your academic pursuit for, it seems, its own sake, are admirable. I once went back to law school to do an LLM for no directly tangible reward but fizzled out at the point of having to do, after my successfully completed course work, a Masters Thesis. I just could not summon the will, first time ever I didn't complete something academic I started, which includes a graduate degree before going to law school. Closest I came after that to doing something for its own sake was about 9/10 years ago when I took some time out to write an extended something on a subject that interested me, doing so for no reason other than I wanted to. Cheers,
- basman
August 10, 2012 at 10:54pm
Poicereal I sympathize with your intent, but your initial logic is askew: a is b doesn't necessarily entail b is a.
- basman
August 10, 2012 at 11:19pm