Discussions of Wealth in America


If a man has an apartment stacked to the ceiling with newspapers, we call him crazy. If a woman has a trailer house full of cats, we call her nuts. But when people pathologically hoard so much cash that they impoverish the entire nation, we put them on the cover of Fortune magazine and pretend that they are role models.

Class warfare or simply paying your fair share?

Former Gov. Mitt Romney (R-MA) last night on CNN actually said:

I’m not concerned about the very poor.

to which conservative writer Jonah Goldberg (National Review) asks “What is wrong with this guy?” and Michelle Malkin quips “Let them eat food stamps.”

Meanwhile, Romney has not addressed the questions raised by Brian Beutler about possible offshore tax avoidance scheme raised on his on-the-record press call last week.

The briefing cleared up several questions, but left others unanswered – including one from TPM that will either exculpate Romney from allegations that he’s used investments in offshore entities to avoid U.S. taxes, or reveal that his campaign has not fully addressed those allegations.

On the call, Romney’s trustee pledged get back to us with this information. But despite multiple inquiries in the days since the conference call, the Romney camp has not set the record straight one way or another….

An IRA can’t finance investments with debt, and, in the United States, it can’t invest in entities that lever up, without being hit by the UBIT.

But if an IRA invests in an offshore fund, and that fund levers up, it can avoid the UBIT altogether. And at 35 percent that’s no small tax to get around, according to multiple tax experts.

When first questioned about this on the call, Romney’s trustee noted, “Governor Romeny’s IRA is not structured in the Caymans, it’s not located in the Cayman’s. It’s tax deferred just like your IRA, and my IRA.”

But in a followup, I asked if his IRA had invested in any offshore entities that would have made it subject to the UBIT if those entities were located on U.S. soil. Romney’s staff has yet to provide the answer.

They talk about class warfare - the fact of the matter is there has been class warfare for the last thirty years. It's a handful of billionaires taking on the entire middle-class and working-class of this country. And the result is you now have in America the most unequal distribution of wealth and income of any major country on Earth and the worst inequality in America since 1928. How could anybody defend the top 400 richest people in this country owning more wealth than the bottom half of America, 150 million people? The other reason Romney pays a lower tax rate than most of us is that so-called “carried interest” (the commission charged by hedge fund managers) is treated as long-term capital gains and taxed at 15%. According to Mother Jones, Bain Capital

spent $300,000 between August 2007 and April 2008 lobbying the House and Senate on bills that threatened the carried interest loophole. Along with other private equity titans like Kohlberg Kravis Roberts and Apollo Management, Bain and its ilk paid lobbying shops, public relations firms, and trade groups like Ogilvy and the Private Equity Growth Capital Council an estimated $15 million between January 2009 and April 2010 to convince lawmakers to keep the loophole alive. The force of those combined lobbying efforts kept the carried interest loophole wedged open, denying the federal government some $10 billion in revenues.

Romney’s Disclosure Leads To Even More Financial Scrutiny

Carried Interest Doesn’t Carry Water

Carried Interest

“Carried interest” refers the commissions that fund managers receive as compensation for their work. These are similar to bonuses which some people get added to their salary. However, they are treated not as “earned income” but as “long-terms capital gains” by the IRS and taxed at 15% even though the fund manager did have any capital at risk.

In the video to the right, Arianna Huffington (Huffington Post) and Henry Blodget (Reuters) discuss capitalism on the balcony of the Davos library and agreed that “carried interest” is outrageous.

While working at Bain Capital, Mitt Romney presumably benefited greatly from this tax loophole.

Blind Trust and Tax Havens

Romney’s tax return shows income from famous tax havens such as Switzerland and the Cayman Islands. He defends these investments on the grounds he can’t control money in a “blind trust.” However, back when he was running against Sen. Ted Kennedy in 1994 he sang quite a different tune:

“The blind trust is an age-old ruse. You give a blind trust rules. You can say to a blind trust, don’t invest in properties which would be in conflict of interest or where the seller might think they’re going to get an advantage from me.”

While Romney’s return reports the income from these havens, there is no logical reason to invest in them unless it is to avoid paying US taxes. Only by reporting a fuller tax history (like his father Gov. George Romney did when he ran for President) can Mitt Romney lift the cloud of suspicion which hangs over investing in these tax shelters.

Discrepancies from ethics forms

Matea Gold and Tomburger write in the Los Angeles Times:

Some investments listed in Mitt and Ann Romney’s 2010 tax returns – including a now-closed Swiss bank account and other funds located overseas – were not explicitly disclosed in the personal financial statement the GOP presidential hopeful filed in August as part of his White House bid.

The Romney campaign described the discrepancies as “trivial” but acknowledged Thursday afternoon that they are undergoing an internal review of how the investments were reported and will make “some minor technical amendments” to Romney’s financial disclosure that will not alter the overall picture of his finances.

A review by the Los Angeles Times/Tribune Washington Bureau found that at least 23 funds and partnerships listed in the couple’s 2010 tax returns did not show up or were not listed in the same fashion on Romney’s most recent financial disclosure, including 11 based in low-tax foreign countries such as Bermuda, the Cayman Islands and Luxembourg.