Tuesday, July 17, 2012

Romney's Tax Returns

Here's what I suspect is going on with Romney's tax returns:

In at least one year in the past five, Romney likely realized enormous capital losses, on paper, in order to cash out an enormous amount of capital gains. In economic downturns, large shocks to net wealth can be leveraged to permit owners to 'unstick' tax-unfavorable positions and move wealth to tax-favored vehicles without ever taking the capital gains. This is a relatively routine sort of transaction for people with large potential tax liabilities, but which results in a sort of shocking-looking tax return.

From a tax accounting perspective, there are thousands of people whose tax returns look much like Romney's. From a political perspective, any factoid which requires one sentence to state and ten sentences to rebut is a winner. The best possible outcome for Romney releasing his tax returns is to provide Obama with a facile attack line which requires an elaborate explanation of tax law to rebut.

That won't happen, so Romney won't release.

4 comments:

Greg Hao said...

Provocative thought and quite possibly true but I'm with Charles Pierce of Esquire on this, I doubt there's anything too damaging, Romney just doesn't think he needs to do it.

Greg Sargent also reminded us of something this morning: Romney provided 23 years of returns to McCain during his VP vetting process, why hasn't any journo asked McCain about Romney (yes, I know it will get a denial and no comment but who knows).

Andreas said...

Actually, I think the 'bad year' is 2009.

On Romney's 2010 return, he has a net capital loss carryforward, which indicates that he more than zeroed out his capital gains in 2009. Presuming he sanitized his dividends through a tax-favored intermediate vehicle and earned very little wage income, his tax rate is likely to be very close to zero.

Anonymous said...

Greg,

McCain has commented on this, saying there was nothing disqualifying in the returns and the returns were fine. http://www.huffingtonpost.com/2012/07/17/mitt-romney-tax-returns_n_1680765.html

Greg Hao said...

Cheers on the link!