Candidates for the presidency should be thoroughly vetted. That is why voters deserve full disclosure of how Mitt Romney's wealth was accumulated and invested, his offshore investments and the nature of his financial relationship with Bain Capital since his retirement. This information goes to the core of Romney's character and values.
The Republican presidential candidate and former governor released 20 years of tax returns when he was vetted for the vice presidency in 2008 before John McCain picked Sarah Palin. In his 2012 bid for the presidency, Romney has made public his 2010 tax return and expects to release his yet-to-be-completed 2011 return.
But Romney's refusal to release his tax returns for the most important years of building his wealth at Bain Capital raises a legitimate concern: Did he build his wealth through aggressive tax strategy that is questionable at best?
Romney's financial affairs lack transparency by design. President Obama fought for tax reforms eliminating special loopholes for the wealthiest, to pay down the deficit and protect the middle class, yet Romney is comfortable exploiting those loopholes, while on the stump he is promoting tax cuts.
• On his recent trip abroad, Romney skipped Italy, for good reasons. Bain Capital, with Romney as CEO, made about $1 billion in a leveraged (minimal cash outlay – low-risk) buyout of an Italian company. Bloomberg News reported that Bain funneled its profits through subsidiaries in Luxembourg, a common corporate way to avoid taxes in other European countries. The buyer, Italy's biggest telephone company, now is valued way below what it paid Bain and other investors for the business. The shock waves of this transaction are still felt in Italy.
• In Romney's self-directed individual retirement account, he used heavy leveraging and a "blocking company," thereby avoiding the "unrelated business income tax" normally imposed on such gains in IRAs. His IRA's growth to $100 million is astounding in light of contribution limits of $30,000 annually. On its face, the IRA was likely funded in part with stock shares valued well below market.
• Presidential candidates generally avoid betting the U.S. dollar will lose value by speculating in Swiss francs. Yet such speculation was the stated purpose of Romney's "blind" trust Swiss bank account, which was closed in early 2010. Was the income reported on earlier tax returns? Did Romney timely file disclosure forms to the Treasury Department?
• Romney's large accounts held in "family trusts" raise the question whether gift taxes were paid and required disclosures were made.
• Romney's apparent disdain for tax obligations is clear from his role in Marriott International's abusive tax shelter activities. From 1993 to 1998, Romney was head of the audit committee of the Marriott board of directors, with responsibilities that included tax planning. The so-called "Son of Boss" tax shelter helped Marriott sell $81 million of mortgage notes, reporting a $71 million "tax loss." Romney was an insider with perspective on the motivation and lack of substance in the transaction, fully understanding the tax avoidance game. Romney reportedly was the board member most familiar with the transaction.
This shelter, used by Marriott and others, represented one of the largest tax-avoidance schemes in history, costing the U.S. billions in lost tax revenues. In 2008, the U.S. Federal Court of Claims ruled against Marriott, which appealed and lost again. The appeals court sided with the Department of Justice, calling Marriott's transactions "fictitious," "artificial," "spectral," an "illusion" and a "scheme."
Voters should know if Romney has done any more than take advantage of legitimate tax breaks not available to common folks.
Maria Magers Roberts retired from the U.S. Treasury Regional Counsel's Office of Appeals after 30 years. She worked on settlement of disputed tax cases, both corporate and individual. She lives in Park City.