Musings on the Mittster’s Taxes
In explaining his refusal to release more of his tax returns than he already has (an incomplete return for 2010* and an estimate for 2011) Romney and his surrogates (including his wife) have stated that no matter how many years he releases, the Obama campaign will just ask for more. In fact Ann sounded a little, ahem, unhinged about the issue when she basically equated calls for release of the returns to “attacks” on them.
So Obama campaign manager, Jim Messina, sent a letter to Matt Rhoades, the Romney campaign manager, suggesting a deal. If Romney would release a total of 5 years’ worth of returns, which includes the 2010 returns previously released and the 2011 return when complete, so we’re looking at 2007 - 2009, then the Obama campaign will declare itself satisfied and will not request any further disclosures.**
The Romney camp wasted no time in stomping their feet and declaring “NO”. It’s not clear whether they also stuck out their tongues. Mitt Romney said he always paid at least 13% in taxes and that should be good enough for You People!
So rather than speculate about what could be in unreleased returns I decided to take a closer look at what is actually in the 2010 return that was released, along with the 3 related “blind trust” returns and the return for the Romneys’ family foundation. (And I do have some qualifications for this as I’ve been a practicing CPA with a Masters of Taxation for the last 30 years. We don’t have a lot of clients in Mittster’s income levels but we do have a few and I have a passing familiarity with the tax
dodges advantaged planning they use.)
If you have any interest in looking at the Romneys’ actual returns (and really, why would most of you if you didn’t have to? ;-) ) pdf copies can be found here.
One thing that has annoyed me is their claim to give 10% of their income to “charity”. In fact Romney declared that his actual tax rate was closer to 20% because of all the money he gives to charity. Because, um, that’s just like paying taxes or something. However a closer look at the return reveals that they make all of their direct cash donations to “Church of Latter Day Saints” commonly known as the Mormon Church. This is on page 140 of the pdf file. Aside from minor amounts passing through from partnerships all of their $1.5 M in cash charitable contributions were made to their church.
Now I realize that technically churches are tax exempt entities but I think it’s arguable that the Church of Latter Saints is anything but a “charity”. Karoli at Crooks & Liars has more to say about that noting (via Reuters):
The Mormon church has no hospitals and only a handful of primary schools. Its university system is limited to widely respected Brigham Young, which has campuses in Utah, Idaho and Hawaii, and LDS Business College. Seminaries and institutes for high school students and single adults offer religious studies for hundreds of thousands.
It counts more than 55,000 in its missionary forces, primarily youths focused on converting new members but also seniors who volunteer for its nonprofits, such as the Polynesian Cultural Center, which bills itself as Hawaii’s No. 1 tourist attraction, and for-profit businesses owned by the church.
The church has plowed resources into a multi-billion-dollar global network of for-profit enterprises: it is the largest rancher in the United States, a church official told Nebraska’s Lincoln Journal Star in 2004, with other ranches and farms in Mexico, Brazil, Argentina, Australia and Great Britain, according to financial documents reviewed by Reuters.
Ranching and farm industry sources say they are well-run operations.
It also has a small media empire, an investment fund, and is developing a mall across from its Salt Lake City headquarters, which it calls an attempt to help revitalize the city rather than to make money. These enterprises are also part of a vast nest egg for tough times. The church expects wars and natural disasters before Christ returns to Earth in the Second Coming, and members are encouraged to prepare by laying in stores of food. Farms and ranches are part of the church’s own preparation.
Charity? You decide.
In addition they made another $1.45M in non cash donations of appreciated stock to the Tyler Foundation which is their family foundation. So how does the Tyler Foundation spend its money? Well, in 2010, despite receiving the large donations from the Romneys and having $1.5 M in capital gains, the foundation was only legally required to distribute about $450,000 in grants. They did exceed this, paying out $647,500. Of this amount 63% or $405,000 went to the Mormon Church or related organizations, private schools, the George Bush Library and the American Equestrian Team. The remainder, $242,500 actually went to organizations that could be categorized as “charitable”. So, on aproximately $21.6 M in adjusted gross income, the Romney’s paid out approximately 1% to organizations peforming actual charitable work.
So, moving beyond the hypocrisy of their massive “charitable” giving, what else in the return should be cause for concern? Well the reams of forms filed to disclose investments in foreign entities and the use of a $127,000 foreign tax credit verify that they do have many investments, and complicated investments, offshore. And I’m not talking about the mutual funds which invest in foreign businesses that they tried to screech about “everybody doing it” when the foreign investments issue first came up.
Another very interesting series of forms flowing through from their “blind” trusts, though. Five separate copies of Form 8886 Reportable Transaction Disclosure Statement. The IRS began requiring entities to file this form with their returns if they were participating in a “reportable transaction” or, as it’s more commonly known, a “tax shelter”. This came about after the IRS busted the tax shelter industry that was busily selling Son of Boss transactions to companies like Marriott International who participated in them because people like Mitt Romney headed up their audit committees and were cool with it. Speculating that the tax shelter industry would not give up so easily, the IRS developed this form and said if you disclose to us that you’re participating in “reportable transactions” we might or we might not catch you (because they actually can’t audit every return that comes in). If they do catch you and you have filed the disclosure you have to pay the taxes back but they won’t throw the book at you. If you have not filed the form, get lawyered up fast.
So what does this tell us about Willard and Ann Romney? Well, what it tells me is that considering their adamant refusal to release more returns, Queen Ann’s tantrum about being “attacked” by You People, Romney’s apparent pride that he’s paid 13 whole % in taxes over the years, their insistence that they are hugely philanthropic because they funnel massive $$ to their church and related organizations and Romney’s apparent willingness to continue to participate in tax shelter transactions which are NOT allowable under the tax code, Willard and Ann Romney are a couple of huge entitled dicks who should never be given the keys to a small business much less the country as a whole.
* I say incomplete because they did not release their Form TD F 90.22-1 which is a required form disclosing your financial interests in other countries if they exceed more than a few thousand dollars. I think it’s safe to say the Romneys are well over that threshold.
** It’s hard to see this tactic as anything but a win for the Obama campaign. They’ve addressed his concern that they’ll just keep asking for more and he still said “no”. So, it would be irresponsible not to keep asking him “why not”?
ETA - Assuming they actually do release the 2011 returns they will not be able to pull the little sleight of hand noted at the first asterisk because there is a new form this year that is collated in the return (and not filed separately as the TD F 90.22-1 is) which requires you to disclose financial holdings in foreign countries that exceed $400,000. I’m guessing they’re considerably over that limit especially as one of the foreign investment forms they filed noted that they had transferred $1.5 million to an offshore fund in 2010.