Saturday, January 21, 2012

The End of Romney

If you were looking for a model for the most unelectable presidential candidate in America, you could hardly do better than Newt Gingrich. Run out of Congress and the Speakership of the House of Representatives by the peers who held him in open contempt, a person critical of government spending who traded his connections to make fortunes off of government spending, a serial adulterer who wanted an open marriage with his second wife, a man who carried on with mistresses behind his first two wive's backs, wives he then dumped soon after finding they had grievous illnesses, a man who led the impeachment of a president who had a one night stand while he himself was in the middle of a long term adulterous affair, a man who had an affair with his high school math teacher and, when he was 19, married her, a man who told his 2nd wife that he had a mistress and the next day gave a speech on family values, a man with a gay sister who never misses a chance to marginalize gay rights, a man who once said, in what may be the most self serving statement in human history, that he strayed from his marriage vows only because he loves his country so much. This a man with a textbook sociopathic narcissistic disorder.

But it appears he may win the nomination.

How is this possible? It turns out the more we learn about the formerly "sure" winner Mitt Romney, the more he appears to be utterly unelectable.

Mitt doesn't help his case by being the most malleable candidate in memory. He has switched allegiance on virtually every major issue in politics, from abortion, to health care, to foreign policy - depending on which office he is running for. While governor of MA, he was to the left of Obama on cornerstone issues. Now he is to the right of Reagan on all issues. Some people actually are passionate about these topics, and find it hard to trust a guy who spins like a top. But we have discovered that, when it comes to his money, Mitt is very passionate - and given to situational ethics.

The milk toast Mitt, it turns out, isn't so milk toast when it comes to money. He told a critic that "corporations are people", he bet $10k like it was pocket change, he whines about "class warfare" when people criticize his vast wealth, he reported that he paid 15% tax on earnings when middle class people pay much more, he called the $375k he earned for speeches last year "not that much" even though that amount alone would put him in the top 1% of earners, he refuses to release his tax returns even though candidates, including his own father, always do so - giving the appearance that he is hiding something.

When Americans are anxious about their own economic circumstances more than any time since the Great Depression, when government is perilously low of financial resources, this is not the time for a candidate to attack the people below him in the economic pecking order by accusing them of class warfare, nor is it the time to be discovered using shady tricks to hide money from the tax man - when those tricks aren't available to the populace in general. Further, hiding those tax tricks from the light of day seems to confirm that Mitt knows he is up to no good and doesn't want the little people to know about it.

Apparently Mitt has transparency problems much bigger than what we know about already. Former Goldman Sachs investment banker John R. Talbot writes in "The End of Romney" that Mitt has somehow gamed tax law to even dispense with the low 15% rate most of us would love to have. A 0% tax rate has an appeal to people who don't care who else has to support our government institutions, but it is unseemly for a presidential candidate to embrace. Then there is the matter of moving money to the Cayman Islands to hide it from the tax man, letting your actions show that you would rather your money works for the economy of the Caymans rather than the U.S. economy.

Newt loves America so much he will betray multiple wives. Mitt loves America so little he lets the Cayman Islands caress his greatest love, his money?

"The Wall Street Journal reports today in its story entitled 'Romney's Unorthodox IRA' that Mitt Romney has between $20.7 million and $101.6 million parked in his IRA.
For Mitt Romney to have accumulated $20 to $100 million in his IRA suggests that somehow he had found a way around this $2,000 a year limit to contributions as there is no way contributing $2,000 a year could ever grow to $20 million in one's lifetime, much less $100 million, regardless of how good an investor one is.

This suggests, and the Wall Street Journal article hints at this, that Romney was not making cash contributions to his IRA but rather parking equity shares of his companies' investment funds there, or quite possibly putting shares of private companies that his firm bought into his 401(k).
If this happened, we need to know at what valuation Romney made these contributions as it is very easy to claim a low stated value for shares of private companies or investment funds that have no publicly available market price. If Romney purposely understated the true value of the shares he contributed to his retirement plan he could be held criminally liable.

It appears that Romney then at some time, possibly at his retirement, converted his 401(k) plan into an IRA and thus permanently avoided the contribution limits on IRAs.
But, as the WSJ reports, "Under current tax law, anybody investing an IRA in a private-equity fund, as Mr. Romney did, would likely incur a hefty special tax on 'unrelated business income,' also known as UBIT. This tax, (is) assessed at a maximum 35% rate..." There is no indication that Romney paid this tax.
And, according to the WSJ, Romney also may have made use of offshore tax havens like the Cayman Islands to further avoid paying his taxes. Romney's company, Bain Capital, made liberal use of offshore vehicles and one way to avoid paying the UBIT tax referenced above is to claim that Romney was not investing in a private equity fund, but rather in an off-shore corporation that itself invested in the private equity fund. ABC News reports that Bain Capital has set up over 138 secretive offshore funds in the Cayman Islands.

Romney has reported recently that his actual effective tax rate is around 15% per year. Robert Reich, as reported in the Huffington Post, suggests that Romney and his private equity funds most likely made ample use of the carried interest rule that allows hedge funds, LBO funds and private equity funds to compensate their managers at capital gains rates rather than ordinary income rates, an advantage only available to wealthy Wall Street insiders.
But Romney was not happy paying 15% per year. By bastardizing the intent of IRA legislation meant to help working Americans save for retirement, Romney has succeeded in shielding $20 million to $100 million of his staggering personal wealth from all taxes to date, an effective tax rate of 0%.
Mitt Romney with all his tax dodging schemes has as much chance of being elected president in this tough economic climate as a draft dodger would have had during the Vietnam War."
Read more:       Romney Unorthodox IRA     Wall Street Journal  
Read more:      The End of Romney         John R Talbot