President Obama’s campaign continues to hammer presumptive Republican nominee Mitt Romney over the GOP challenger’s refusal to release more of his tax returns. Romney has provided one year’s record and promised a second year’s worth of returns. But even some of his fellow Republicans now say that’s not enough.
Obama’s campaign launched a new TV ad this week, shining a spotlight on what we do and do not know about Romney’s taxes asking,
“What is Mitt Romney hiding?”
So far, Romney and his family trusts have released their 2010 tax returns, which fill hundreds of pages. He got an extension for his 2011 return, and has promised to release that as soon as it’s ready, no later than mid-October.
Romney says that should be enough.
“People always want to get more. We’re putting out what’s required, plus more,” he said last week on CNN. “Those are the two years that people will have and that’s all that’s necessary for people to understand something about my finances.”
But tax professionals still have plenty of questions. For example, Lee Sheppard, who’s a contributing editor at the journal Tax Notes, wants to know how Romney amassed so much money in his tax-deferred retirement account.
“All we know is really that it’s a big number, and we’re a little bit baffled as to how it got so big,” Sheppard says.
Candidates list their assets in broad ranges, so we know Romney’s retirement account is worth somewhere between $21 million and $102 million. Law professor Ed Kleinbard of the University of Southern California says that’s a lot of money considering the most Romney could ever contribute to the account was $30,000 a year.
“Either Gov. Romney is sort of the modern day equivalent of Jack and his magic beans who somehow created a mighty beanstalk or he took a very aggressive position with respect to valuing insider stock,” Kleinbard says.
Kleinbard means that Romney might have loaded up his retirement account with assets from his private equity firm, Bain Capital, and assigned artificially low values to those assets in order to get around the federal contribution limits.
If so, Romney would still have to pay taxes on the real value of the assets when they’re withdrawn from the account. But in the meantime, the money can grow tax free. Tax Notes‘ Sheppard says that’s an advantage most taxpayers don’t have.
“If you happen to work for a partnership and your compensation is arranged this way, you get this very beneficial treatment,” Sheppard says.
Romney’s campaign didn’t respond to NPR’s questions about his retirement account. But his taxes have been dogging the candidate since the GOP primary. At an NBC debate in January, Romney argued there’s nothing wrong with minimizing taxes.
“I pay all the taxes that are legally required and not a dollar more,” he said. “I don’t think you want someone as the candidate for president who pays more taxes than he owes.”
Role At Marriott
Romney was equally aggressive toward taxes in the business world. For years, he was a director of Marriott International, the hotel company founded by Willard Marriott. Kleinbard, who worked on Wall Street and served as chief of staff for Congress’ Joint Committee on Taxation, says Marriott had a reputation.
“Marriott was always a tax shelter promoter’s first call,” he says. “Marriott was one of those companies that just loved to buy tax shelters.”
Bloomberg reported this year on one Marriott tax shelter, known as “Son of BOSS.” It involved creating paper losses to offset taxes on real income. The Internal Revenue Service challenged the shelter and Marriott lost in court. Judges called the shelter “fictitious” and a “scheme,” and the company was forced to pay $29 million. Kleinbard notes that when the shelter was adopted, Romney was the chair of Marriott’s audit committee.
“It’s the job of the chair of the audit committee of Marriott to say, ‘Hey, wait a minute, just because we have an opinion from Winkin’, Blinkin’ and Nod saying that this is a terribly clever idea, I need to apply some common sense as opposed to just signing on the bottom line,’” Kleinbard says.
A statement from Marriott says the company only engages in tax deals it believes are lawful.
“Marriott only engages in transactions that we believe are in accordance with the tax code and that we think will create shareholder value,” it said.
Kleinbard sees a pattern for Romney of cutting tax corners. Asked about his taxes in that NBC debate, Romney sidestepped.
“The real question is not so much my taxes, but the taxes of the American people,” Romney said.
Romney, whose 2010 tax rate was less than 14 percent, says he wants to overhaul the tax code which he calls “far too complex,” “far too intrusive,” and “far too great.”