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Thursday, July 5, 2012

Vanity Fair: Where Mitt's Money Lives

Vanity Fair CoverVanity Fair (Aug. 2012):  Where the Money Lives, by Nicholas Shaxson:

For all Mitt Romney’s touting of his business record, when it comes to his own money the Republican nominee is remarkably shy about disclosing numbers and investments. Nicholas Shaxson delves into the murky world of offshore finance, revealing loopholes that allow the very wealthy to skirt tax laws, and investigating just how much of Romney’s fortune (with $30 million in Bain Capital funds in the Cayman Islands alone?) looks pretty strange for a presidential candidate. ...

Come August, Romney, with an estimated net worth as high as $250 million (he won’t reveal the exact amount), will be one of the richest people ever to be nominated for president. Given his reticence to discuss his wealth, it’s only natural to wonder how he got it, how he invests it, and if he pays all his taxes on it. ...

Ed Kleinbard, a professor of tax law at the University of Southern California, says the Swiss account “has political but not tax-policy resonance,” since it—like many other Romney investments—constituted a bet against the U.S. dollar, an odd thing for a presidential candidate to do. The Obama campaign provided a helpful world map pointing to the tax havens Bermuda, Luxembourg, and the Cayman Islands, where Romney and his family have assets, each with the tagline “Value: not disclosed in tax returns.” ...

[R]omney’s personal tax rate is a particular point of interest. In 2010 and 2011, Mitt and Ann paid $6.2 million in federal tax on $42.5 million in income, for an average tax rate just shy of 15 percent, substantially less than what most middle-income Americans pay. Romney manages this low rate because he takes his payments from Bain Capital as investment income, which is taxed at a maximum 15 percent, instead of the 35 percent he would pay on “ordinary” income, such as salaries and wages. Many tax experts argue that the form of remuneration he receives, known as carried interest, is really just a fee charged by investment managers, so it should instead be taxed at the 35 percent rate. Lee Sheppard, a contributing editor at the trade publication Tax Notes, whose often controversial articles are read widely by tax professionals, is nonplussed that the Obama campaign has been so listless on the issue of carried interest. “Romney is the poster boy, the best argument, for taxing this profit share as ordinary income,” says Sheppard.

In the face of such arguments, Romney’s defense is that he never broke the rules: if there is a problem, it is in the laws, not in his behavior. “I pay all the taxes that are legally required, not a dollar more,” he said. Even so. “When you are running for president, you might want to err on the side of overpaying your taxes, and not chase every tax gimmick that comes down the pike,” says Sheppard. “It kind of looks tacky.”

The assertion that he broke no laws is widely accepted. But it is worth asking if it is actually true. The answer, in fact, isn’t straightforward. Romney, like the superhero who whirls and backflips unscathed through a web of laser beams while everyone else gets zapped, is certainly a remarkable financial acrobat. But careful analysis of his financial and business affairs also reveals a man who, like some other Wall Street titans, seems comfortable striding into some fuzzy gray zones.

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Comments

I DON'T CARE!!! Unless someone provides evidence of criminal activity or tax fraud, I don't care how much money Romney has or where he keeps it or what he spends it on.

It's not a zero-sum world. I'm glad he made a lot of money by being successful in his chosen career. That's a good thing. And it should be celebrated, not scorned.

Posted by: ColoComment | Jul 5, 2012 12:13:16 PM

WELL YOU SHOULD CARE!!!
Just because he took advantage of tax loop holds doesn't mean he gets a pass. Just because its legal- doesn't make it right
Do you want a man serving as your president to be full of "secrecy and deception"?
Honesty and trust goes a long way in selecting a president.
If he and you are so proud of his success- why is it such a problem to disclose? It's not THAT you made your money-- it's HOW you made your money. All millionaires are not created equal Romney comes across as "shady" compared to other millionaires such as Warren Buffet and Bill Gates.

Posted by: Jean | Jul 29, 2012 9:32:10 AM