Nicholas Shaxson gives a good glimpse of Mitt Romney’s secret financial empire in the current issue of Vanity Fair—a glimpse and not a full picture, because the bulk of Romney’s investments are still hidden from view.
It’s striking how much of Romney’s wealth is invested in foreign tax havens, outside the scrutiny of the Internal Revenue Service or anybody else. When Romney reluctantly made public his 2010 tax filing, it included 55 pages of reports on dealings with foreign entities. Maybe Romney believes in America, but he doesn’t keep his money here.
Offshore tax havens not only enable Americans such as Romney to shelter income from U.S. taxes, they provide a way for foreigners to invest in the United States while escaping the taxes, disclosure requirements and regulations to which they’d be subject if they invested directly. Shaxon reported that a filing from Mitt Romney’s first $37 million Bain Capital Fund in 1984 included $2 million from Robert Maxwell, the crooked British newspaper tycoon; $1.5 million from two anonymous companies that shared a Miami address with Eduardo Poma, a member of El Salvador’s murderous ruling oligarchy; $2.5 million from a Swiss corporation; $3 million from a Bahamas corporation; and three corporations from Panama, the money laundering center of Latin America.
Romney’s overall income tax rate was just under 15 percent, much less than most wealthy or even middle-class Americans pay. He used a tax loophole under which his payments from Bain Capital were defined as investment income (“carried interest”). That’s the same tax loophole that hedge fund managers use.
He has more than $100 million in his Individual Retirement Account, which is very good. The possible explanations are that Romney is a uniquely skillful and lucky investor, or that he used to subterfuge to undervalue his original investment.
Shaxson adds details to the off-told story of how Mitt Romney’s Bain Capital managed to profit whether the companies in which they invested did well or poorly. The basic story is that Bain Capital bought companies with borrowed money, then loaded the debt onto the companies themselves while Bain executives collected big fees and dividends. Sometimes the companies did well under Bain Capital management, sometimes they collapsed under the new burden of debt, but whether they did well or poorly, Romney and Bain Capital did well.
It is important to emphasize that none of this is necessarily illegal. Shaxson states repeatedly in the article that he has no evidence that Romney broke the law—only that, in many cases, if he did break the law, there would be no way to know. What Shaxon does show is that Romney is the common type of businessman who thinks that whatever is legal is ethical, and anything in a grey area is legal.
The Obama presidential campaign is making Romney’s finances a central issue. That’s legitimate, but I don’t know of anything the Obama administration has done or proposed to do about foreign tax havens or any of the other abuses the Obama campaign denounces. President Obama hasn’t even tried to close the “carried interest” tax loophole, which enables hedge fund managers to get preferential tax treatment. If what Governor Romney is doing is so wrong, what has President Obama done, tried to do or propose to do about it?
Buy the August issue of Vanity Fair or click on Mitt Romney’s Offshore Accounts, Tax Loopholes and Mysterious I.R.A. to read the full article. It’s well worth reading in full.
Click on George Romney and Mitt Romney for a contrast of Mitt Romney with a very different type of businessman.
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