There's something wrong with that IRA

There's something wrong with that IRA

by digby

This really should be a bigger deal. If you want to run for president and ostensibly represent all the people of this country, you should have more respect for the spirit of the law:

Another suggestion is that in 2009 he paid income taxes significantly below the 13.9 percent he paid in 2010. This is more plausible, and potentially more damaging politically, even if perfectly legal.

After all, the one year’s tax returns that he has released raise doubt about his campaign’s claims that his offshore accounts did not save him one penny of tax. Putting business assets into an individual retirement account invested in a Cayman Islands corporation allows Mr. Romney to avoid the “unrelated business income tax” — a 35 percent levy — on at least some of his I.R.A.’s earnings, a tax that he would have had to pay if his I.R.A. were held directly by a financial institution in the United States.

With an I.R.A. account of $20 million to $101 million, the tax savings would be more than a few pennies.

The I.R.A. also allows Mr. Romney to diversify his large holdings tax-free, avoiding the 15 percent tax on capital gains that would otherwise apply. His financial disclosure further reveals that his I.R.A. freed him from paying currently the 35 percent income tax on hundreds of thousands of dollars of interest income each year.

Given the extraordinary size of his I.R.A., we have to presume that Mr. Romney valued the assets he put in his retirement account at far less than he would have sold them for. Otherwise it is quite a trick to turn contributions that are limited to $30,000 to $50,000 a year into the $20 million to $101 million he now has there. But we cannot be certain; his meager disclosure of tax records and financial information does not indicate what kind of assets were put into the I.R.A.

Mr. Romney’s Cayman Islands and Bermuda corporations also probably allowed him to avoid limitations on deductions for investment expenditures that would otherwise apply. So we don’t need any more tax returns to know that Mr. Romney is an Olympic-level athlete at the tax avoidance game. Rich people don’t send their money to Bermuda or the Cayman Islands for the weather.

Nobody says a vastly wealthy man like Romney shouldn't be able to keep most of his vast wealth and pass some of it to his heirs, but this is certainly not what the IRA law was envisioned to do. It's supposed to be an incentive for average Americans to save some money for retirement. It's called and Individual Retirement Account after all. Average Americans aren't allowed to "invest" more than five or six thousand a year and they hope against hope that they'll be able to gain a few percent a year and take advantage of compound interest. There is no way in which a man of Romney's means needs any "help" in that department and to use the IRA to shelter his investments and avoid millions of dollars in taxes may be legal, but it's slimy.

It's very hard to fathom why a man worth hundreds of millions of dollars (and who has already sheltered hundreds of millions for his heirs using equally dodgy methods) is so greedy that he couldn't make himself pay a reasonable amount of taxes even as he was running for president --- which he has been doing for the past eight years. After all, if he paid normal taxes on his wealth over the past few years he'd still be worth hundreds of millions of dollars! How much money does this man need?

Given a clear choice between being a stand-up, straight arrow, beyond reproach in his finances, Romney chose to behave like a typical Master of the Universe. He has made a choice: he cares more about hoarding every last penny of his vast wealth than he does about being president.

Update: Harry Reid is a wily old bird:

Saying he had "no problem with somebody being really, really wealthy," Reid sat up in his chair a bit before stirring the pot further. A month or so ago, he said, a person who had invested with Bain Capital called his office.

"Harry, he didn't pay any taxes for 10 years," Reid recounted the person as saying.

"He didn't pay taxes for 10 years! Now, do I know that that's true? Well, I'm not certain," said Reid. "But obviously he can't release those tax returns. How would it look?

As Peggy Noonan said, "Is it irresponsible to speculate? It would be irresponsible not to..."