Two stories this week and last have ratcheted up the pressure. One is a recent web exclusive for "The Last Word with Laurence O'Donnell" where David Cay Johnston has five questions for Romney that can only be answered with his tax returns. The other is a blockbuster story by Nicholas Shaxson (h/t TPM) in the new Vanity Fair on the shadowy world of Romney's tax havens. Together, they put a laser-like focus on the finances of the man who could become our 45th President.
Johnston is a well-known former New York Times reporter, Pulitzer Prize winner, and the author of the major books Perfectly Legal and Free Lunch. If you don't have time to watch his 3:45 video, here are the five questions:
"1. Did you buy any illegal or gray area tax shelters?
"2. Did an IRS audit ever uncover serious problems with any of your tax returns?
"3. Did you make use of offshore vehicles to defer, or avoid paying, federal income taxes?
"4. Did you take advantage of any tax strategies that the IRS did not uncover in audits?
"5. Did you fully tithe to the Church of Jesus Christ of Latter Day Saints every year and take a deduction on your tax return that shows that?"
These are important questions. We know that Governor Romney has had a Swiss bank account, as well as money in other tax havens like the Cayman Islands, Luxembourg, Bermuda, and Ireland. Romney's answer to any question about his taxes has basically been, "Trust me." But the guy's running for President, for Pete's sake. He owes us more than that.
Shaxson, a researcher for the Tax Justice Network and author of the book Treasure Islands, asks us to consider the possibility that maybe not everything Romney has done tax-wise has been legal. He opens with a story told by a former Bain employee about how Romney encouraged him to lie to get secret information on competitors. There is, of course, the fact that Romney has funds parked in numerous tax havens and the fact that his supposedly "blind" trust invested in a business started by Romney's son Tagg, and the fact that he has $102 million in his IRA despite a contribution limit of $2000 per year for the entire 15 years Romney ran Bain. Obviously nothing to see here...
The standard answer of the Romney campaign to all this is that he always followed the law. As Jon Stewart had to point out since the major media did not, Romney did plenty to affect the law he was supposedly "just following," including his defense of the "
Further, Shaxson reveals that an early filing of the original Bain Capital fund in 1984 showed that many of its foreign investors were routed through tax havens and that at least one was a notorious financial criminal, Robert Maxwell. Thus, Bain helped foreigners take advantage of the fact that the United States has set itself up as a tax haven for non-citizens (see also Jason Sharman's paper on setting up anonymous companies in the U.S. and elsewhere; h/t Robert Kudrle). Shaxson quotes Rebecca Wilkins of Citizens for Tax Justice, “It is shocking that a presidential candidate should think that is O.K.” for Bain to service the likes of Robert Maxwell.
The bottom line is that there is a lot of unsettling information in what investigators have so far been able to piece together about Romney's finances. The easiest way for Governor Romney to put to rest what his campaign described to Shaxson as "unfounded allegations and insinuations" would be to release his tax returns. Yet he has not done so and shows no sign of changing his mind. Josh Marshall calls the questions "kryptonite" and thinks Romney will come under a lot of pressure to release more tax returns. Let's hope so. The guy's running for President, for Pete's sake.
Updated to correct "covered interest" to "carried interest." Thanks to m.jed at Angry Bear.
Update 2: Via Gotta Laff at The Political Carnival, here is a Wall Street Journal video covering the low-valued special class of shares that Romney and other Bain executives put into their IRAs, which tends to bolster Shaxson's contention that this is the source of the huge gains in Romney's IRA. (As opposed to the suggestion of some commenters that he rolled over other types of income into his IRA when he left Bain.) The key question from a tax law perspective is whether these shares were properly valued.