Thursday, January 19, 2012

A Tidy Little Fortune

Salon's Joan Walsh has a reasonable suggestion, made with tongue pressed firmly against cheek, pertaining to the controversy surrounding Mitt Romney's reluctance to release his tax returns.       Mitt's father George, she argues, released twelve years of his tax returns when the Michigan governor made his ill-fated run at the GOP presidential nomination in 1968.  The current Romney thus could compromise and release the last six years of his returns.

But there is little reason to expect he will, given that the money he made in Bain Capital investments was taxed at the 15% capital gains rate.         And especially now that

tax experts tell ABC News there are other reasons Romney may not want the public viewing his returns.    As one of the wealthiest candidates to run for president in recent times, Romney has used a variety of techniques to help minimize the taxes on his estimated $250 million.     In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry.    Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.

Official documents reviewed by ABC News show that Bain Capital, the private equity partnership Romney once ran, has set up some 138 secretive offshore funds in the Caymans.

A fund manager, as was Romney, pays only the capital gains rate of 15% because the profits are treated as carried interest.       However, in September President Obama, demonstrating that he is not a Republican (but only plays one on TV), proposed that the management of funds be taxed at the same rate, 35%, as ordinary income.  

The policy and political benefit of this proposal is evident.     Nevertheless, it is uncertain whether the Obama campaign will choose to take full advantage of the manner in which Mitt Romney has accumulated his extraordinary wealth.      The Washington Examiner reports

Jeffrey Zients will serve as President Obama's new acting director of the Office of Management and Budget (OMB),but the president's decision might undercut attacks on Republican Mitt Romney's career as a venture capitalist, because Zients and Romney are both alumni of Bain & Company.

"I'm pleased to designate Jeff Zients to lead the Office of Management and Budget.     Since day one, Jeff has demonstrated superb judgment and has provided sound advice on a whole host of issues,"  Obama said in a statement accompanying the announcement today.   Zients previously served as Deputy Diretcor of OMB under Jack Lew, who became Obama's chief of staff with the departure of Bill Daley.

Stunningly cynical, but the President nonetheless has been presented with a splendid opportunity to portray the GOP and its likely standard-bearer as out-of-touch with the average American, not unlike the depiction of George HW Bush, when he was accused (accurately or otherwise) of being blissfully ignorant of the supermarket scanner.        That was a trivial matter- but paying income taxes at a lower rate than a secretary or a police officer is not.      And Obama can enhance that image of Romney by himself releasing his tax returns- from the past twelve years, as did George Romney, or the past decade, or whatever.       Mitt may show his 2010 return but that may not accurately portray him as the product of uncommon privilege.     The former Massachusetts governor was by late in the year already a presidential candidate and no doubt had decided he would be so much earlier in the year, perhaps as early as November 5, 2008.        The records of bygone years would likely be so much more revealing.   

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