What timing! No sooner do I quote an expert speculating that Mitt Romney might be reluctant to release previous tax returns because of possible offshoring, then ABC News breaks the story open:
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 fortune. 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.
In fairness to Romney, there’s still much we don’t know here. His campaign says the offshoring is about attracting foreign investments and doesn’t give Romney any tax advantage. But experts interviewed by ABC said there were still problems here, ones that cost the U.S. Treasury:
Tax experts agree that Romney remains subject to American taxes. But they say the offshore accounts have provided him — and Bain — with other potential financial benefits, such as higher management fees and greater foreign interest, all at the expense of the U.S. Treasury. Rebecca J. Wilkins, a tax policy expert with Citizens for Tax Justice, said the federal government loses an estimated $100 billion a year because of tax havens.
[Jack] Blum, the D.C. tax lawyer, said working through an offshore investment vehicle allows the investor to “avoid a whole series of small traps in the tax code that ordinary people would face if they paid tax on an onshore basis.”
Wilkins agreed, saying the “primary advantage to setting those funds up in an offshore jurisdiction like the Cayman Islands or Bermuda is it helps the investors avoid tax.”
“It helps U.S. investors avoid U.S. tax,” said Wilkins, “it helps foreign investors avoid taxes in their home country, so it’s not illegal or improper to set those funds up in a foreign jurisdiction, but it makes it more attractive to investors because it helps them avoid paying taxes on that income.”
The analyst I spoke to earlier said that such offshore structures might be a disincentive for Romney to release returns from previous years. Romney has said he’s prepare to release his 2011 returns, i.e., the one that he will file this year. The analyst tells me these could have been restructured in time for the campaign.
Take special note of the quote that one expert gave to ABC: “His personal finances are a poster child of what’s wrong with the American tax system.” As I noted earlier, this is very dicey for Romney. Dems want to paint Romney as the walking embodiment of everything that’s unfair about our tax system and of all the ways the system is rigged on behalf of the rich and against the middle class. This won’t hurt that case.
One wonders if these revelations — combined with the layoffs at Bain; Romney’s tax rate; the fact that his tax plan would give the very wealthy enormous tax cuts while raising taxes marginally on lower income people; and his penchant for saying things that perfectly feed the “one percent” storyline — will generate any concerns among Romney’s top backers about his electability.
