September 21, 2012

At 3 pm on Friday, Mitt Romney will release his tax returns. But as of 2 pm, the campaign has already released its favorable spin on them, saying he paid a 14.1% effective rate, gave 30% to charity, and paid an average of 20% over the last 20 years (without showing us those returns or telling us the rates over these 20 years). So what – pre-3 o’clock – can we already glean about the release?

 

1. Playing with Timing: Designed for Maximum Spin & Minimum Information

 

As any political analyst knows, dropping news late on Friday guarantees the least possible coverage because it is too late for a weekday, because Saturday newspapers and television have the smallest viewing numbers, and because Sunday news shows often consider Friday to be “old news.” By dropping these complicated returns so late on Friday, the Romney Campaign hopes the initial story (he released his returns!) hits the evening news, but the real details (what’s in the complicated returns that will take some time to figure out) come out too late to give any meaningful reporting on them.

 

2. Playing with Averages: Why 20 Years, Instead of 10? Why an Average and Not Individual Rates?

 

While refusing to release more than two years of tax returns or the tax rates for any year prior to 2010, Romney has released a statement from an accounting firm that his tax return average rate over twenty years (which no one had asked for) was at 20%. Why would he release an average rather than individual years? And why twenty years rather than the ten requested by the media that is typical for candidates? Probably because very high tax rates for five years in the 1990’s can cover up for very low tax rates over the last decade. Recall that twenty years ago were the first years of the Clinton Presidency when Clinton raised the top marginal rate to 39.6%. Also recall that under a Democratic Congress, from the second term of the Reagan Presidency through Clinton’s first term, the maximum capital gains rate was 28-33%. It wasn’t halved to a top rate of 15% until the Republicans took Congress and George W. Bush became President.

 

Simply put, under Democratic rule, rich people like Mitt Romney paid more in taxes. (In fact, it’s the primary reason we had a massive budget surplus under Bill Clinton.) As Clinton would say, it’s arithmetic. Do the math. For example, five years of 39.6%, averaged with fifteen years of 13.5% gives an average tax rate of just over 20%. No doubt this is closer to the truth of Romney’s returns. But he almost certainly releases a 20-year average, rather than the rates for individual years. Why? Because the latter would show that in the early 90’s, he was paying more than 30% in taxes. And in the Bush Jr. years, he was consistently paying under 15%. So Romney releases a twenty-year average, rather than a 10-year average or individual years, to hide this inconvenient truth.

 

3. Making 2011 Look Good

 

Romney’s aides have bragged he gave 30% of his wealth to charity. While that is certainly generous, it happened in the one year he knew would be released during his Presidential Campaign. The real question is what did he give in past years. Here, giving a 20-year average would be useful. But Romney is not disclosing that.

 

4. Hiding Tax-Dodging Schemes in Earlier Tax Returns.
Did Romney Take Advantage of the 2009 IRS Swiss-Bank Tax Amnesty?

 

No winning Presidential candidate in the past 40 years has released fewer years of tax returns than Mitt Romney. So why can’t he release the minimum of 5 years that, by custom and convention, has been deemed sufficient for other candidates in the past? Romney’s been running for President since 2007. He’s had time to manufacture his returns to clean up his act. Why not just disclose them? My guess is it all has to do with those secret Swiss bank accounts.

 

Prior to 2009, the Swiss Government refused to disclose to the United States bank accounts held there by Americans seeking to avoid payment of U.S. Taxes. But that all changed in 2009, when following a dramatic whistleblower disclosure at Swiss bank UBS, the Swiss Government handed over to the IRS the names of thousands of wealthy American tax scofflaws. The IRS then gave these Americans illegally hiding their money from U.S. taxation a one-time amnesty from criminal prosecution if the bank accounts were disclosed on the 2009 tax returns and all back taxes were paid.

 

I believe Romney took advantage of this amnesty– as I suspect we will learn in a tell-all book a few months after he loses the election. That would mean that Romney was absolved from criminal prosecution in 2009. However, he would never want to show the American People that he cheated on his taxes prior to the 2009 disclosure. I would love to see one reporter ask Romney if he took advantage of the Swiss-bank tax amnesty of 2009.