What might be hiding in Romney's tax returns?

WASHINGTON Fri Jul 20, 2012 3:33pm IST

U.S. Republican presidential candidate and former Massachusetts Governor Mitt Romney gives a statement to reporters gathered at Middlesex Truck and Coach after he toured the facility during a campaign event in Roxbury, Massachusetts July 19, 2012. REUTERS/Jessica Rinaldi

U.S. Republican presidential candidate and former Massachusetts Governor Mitt Romney gives a statement to reporters gathered at Middlesex Truck and Coach after he toured the facility during a campaign event in Roxbury, Massachusetts July 19, 2012.

Credit: Reuters/Jessica Rinaldi



WASHINGTON (Reuters) - Mitt Romney tried again on Thursday to shift the campaign conversation away from his refusal to disclose more of his tax returns, raising questions about what may be in them.

While Romney accused President Barack Obama of demonizing business success by hounding the Republican challenger over the issue, tax experts were speculating about what might be in Romney's undisclosed returns.

So far he has released only his 2010 return and a draft of his 2011 return. He has pledged to release the full 2011 return when it is ready. He has also made disclosures to election officials that shed some light on his personal finances.

Formerly governor of Massachusetts, Romney co-founded private-equity firm Bain Capital, a highly successful investment house, and is one of the wealthiest individuals ever to run for the White House.

Presidential candidates are not required to disclose their tax returns, but it has become common practice. Romney's father released 12 years of returns when he ran for president in 1968.

Obama, whom Romney presumably will challenge in November, has released returns back to 2000.


Could it be that Romney paid very little in taxes in 2009 or earlier?

Romney's tax return information released in January showed he paid a 13.9-percent effective tax rate in 2010 and expected to pay a 15.4-percent effective rate on his 2011 income.

Those rates are far below the 35-percent top tax rate for wages, chiefly because Romney gets most of his income from investment gains, which are taxed at a rate of 15 percent.

The 2008 financial crisis hammered many wealthy investors. Some tax experts speculate the crisis may have generated large capital losses for Romney that, carried forward into 2009, might have sharply reduced his tax bill for that year.

Romney campaign spokeswoman Andrea Saul said on Thursday that there has been no year in which Romney paid zero taxes.

Romney might have had other types of income in 2009 and earlier that could not be offset by capital losses, other experts said.

"The number everyone is focused on is, of course, the effective tax rate," said University of Notre Dame accounting professor Brad Badertscher.

Obama reported paying effective tax rates of about 26 percent in 2010 and about 20.5 percent in 2011.


Romney's individual retirement account, or IRA, holds as much as $101 million, despite an annual contribution limit of about $6,000. How could it have gotten so large?

Some tax experts suggest its value has been bloated by stock acquired by Bain at rock-bottom prices. The IRA holds some of Romney's most lucrative investments, according to a financial disclosure form filed with election officials last August.

Pre-2010 tax returns might reveal little about the IRA, however, since personal returns only show contributions and withdrawals in a given year, and would not show, for example, the values of partnership interests.


Ann Romney, the candidate's wife, held a trust with a $3 million bank account at UBS AG, the Swiss banking giant that in 2009 agreed to settle U.S. charges that it helped Americans evade taxes. The account was closed in 2010, the Romney campaign said.

University of Southern California Professor Edward Kleinbard wondered if the Swiss account generated income for the Romneys in ways they would rather not disclose, perhaps for instance by investing in foreign currencies against the U.S. dollar.

"Most presidential candidates don't think it appropriate to bet that the U.S. dollar will lose value by speculating in Swiss francs, which is basically the rationale offered by the trustee of Romney's 'blind' trust for opening this account," Kleinbard wrote in a Los Angeles Times opinion piece on Wednesday.

The trustee in charge of the Swiss account said it was an attempt to diversify investments.


Romney earned about $13 million in income over the past two years from "carried interest," a form of earnings available to private-equity firm partners and taxed at the 15 percent investment tax rate, rather than the higher rate on ordinary income, according to the campaign.

The carried interest provision of the U.S. tax code has repeatedly been targeted for elimination by Democrats who call it unfair, but the private-equity industry has fought repeal.


In 2010, Romney and his family had substantial income from private equity, venture capital and other funds, according to disclosures in August to the Federal Election Commission.

Much of this income came from funds organized by Bain Capital. Some of the funds and affiliates are in tax havens such as the Cayman Islands, Bermuda and the U.S. state of Delaware.

"The so-called offshore account in the Cayman Islands, for instance, is an account established by a U.S. firm to allow foreign investors to invest in U.S. enterprises and not be subject to taxes outside of their own jurisdiction," Romney said in a recent interview in National Review magazine.

The tax returns released thus far also show investments in places such as Luxembourg and Switzerland.

No one is claiming these investments were illegal, but the use of offshore tax havens could hurt Romney in the campaign.

(Additional reporting by Lynnley Browning; Reporting By Kim Dixon; Editing by Kevin Drawbaugh and Philip Barbara)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
rlee64 wrote:
Love the headline. I didn’t know opinion was news these days. I’d like to see a report on what IS in them, but this . . . this is propaganda.

Jul 20, 2012 5:16pm IST  --  Report as abuse
Mr_Bill wrote:
Ms Dixon, I ammore interested in Mr Romney’s returns for 1999-2003; when hw was registered as CEO and President of BAIN CPITAL while that company (of Romney’s) closed American factoris, and exported US jobs to cheaper job markets.

Mr Romney claims he went off and worked on “the Olympics.” But what does his 1040 say he was employed doing?

If he made no entry for salary as Presdent or CEO, perhaps he did have his hands off his corporoation; but if not, he is lying, and perhaps gui;ty of tax fraud or misappropreiatinjg funds, od collecting money for a do-nothing job.

Let us hope Mr Romney releases these 10 year old returns, and let is hpe reporters realize that the answer to who exported US jobs; laid off US workers for a few more dollars profit, may be in this return.

Jul 20, 2012 5:37pm IST  --  Report as abuse
suevee wrote:
I think he should release two returns: 2001 and 2002. Because:

Bain described Romney in 2001 SEC filings as the “sole stockholder, chairman of the board, chief executive officer, and president.” Another form stated that he owned 100 percent of the company in 2002 and received a six-figure salary from Bain in 2001 and 2002. His listed title: “Executive.”

Earlier reporting on the topic by Talking Points Memo and Mother Jones had already begun to chip away at the Romney narrative.

The Romney campaign is still sticking with its candidate’s story.

“The article is not accurate,” spokeswoman Andrea Saul said in a statement released to reporters following the Globe story. “As Bain Capital has said, as Governor Romney has said, and as has been confirmed by independent fact checker multiple times, Governor Romney left Bain Capital in February of 1999 to run the Olympics and had no input on investments or management of companies after that point.”

Yet Romney’s sworn testimony appears to back up the SEC filings and contradict his personal disclosure forms submitted to Massachusetts officials in 2002, in which he said that he retired from Bain on Feb. 11, 1999.

Jul 20, 2012 10:30pm IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared