I get that to lay people, the tax code seems incredibly complicated. It is complicated, and years of both parties legislating through the tax code has made it that way. I understand that the sepia-toned relief of an American being able to puzzle out his taxes on the hood of his pick-up truck before he goes fishing is a powerful image.
But honestly, the mainstream media has to stop acting like Mitt Romney is beset on all sides by byzantine forces that only our greatest theoretical physicists can understand. Taxes are governed by laws. As I’ve said before, we have professionals who deal with those laws; they are called tax lawyers. In fact, if you have modest investments and intelligence, you probably could do your taxes on the hood of your pick-up truck, provided you had a Macbook and downloaded TurboTax.
If, on the other hand, you want to make millions of dollars a year, enjoy the benefits of sophisticated investments, and keep money offshore to avoid paying American taxes on it, then you’re going to have to hire a freaking professional to help you. We’re going to cry over this? We’re going to be sad that we live in a world where people who make extraordinary amounts of money have to rely on trained professionals to help them make just a little bit more?
I guess the Times isn’t exactly crying over it (Fox News has been carrying most of the water on poor Mr. Romney and his complicated taxes), but they are smacking around one of the Biglaw professionals Romney hired. Let’s see which firm…
Here is the premise of the Times’s in-depth look at the Romney tax returns:
But what really stands out is the mind-numbing complexity of tax laws, and about how hard it seems to have been for even the high-priced help Mr. Romney can afford to get things right.
Well, what really stands out to me is that a man who has desperately wanted to be president for probably a decade was still using every tax loophole imaginable as recently as 2011. The man wants to be president so badly that he’s abandoned his principles on a woman’s right to choose, but it was a bridge too far to just take the hit and stick all his money into a Bank of America savings account and U.S. Treasury bills for the past two years to avoid some of this scrutiny. Greed is one hell of a sin.
Anyway, after “uncovering” $44,000 that Romney shouldn’t have paid in taxes (not being perfect is a good way to throw the auditors off the scent), the Times takes a whack at Romney’s trustee, Ropes & Gray partner R. Bradford Malt:
Mr. Romney was allowed to keep getting carried interest on new Bain partnerships for many years after he left the firm, and in 2010 he assigned the proceeds from a couple of partnerships to the Ann Romney trust. In the tax return for that trust, Mr. Malt signed letters electing to use Section 83(b) of the tax code in connection with Mr. Romney’s carried interest from two Bain partnerships. Such an election may or may not be legal, but it is certainly unnecessary.
The section is normally used to let executives pay taxes on profits from restricted stock grants at capital gains rates. Since carried interest is already taxed at those rates, there would seem to be no reason to file that form. Moreover, to qualify for Section 83(b) treatment, the grant must involve restrictions. Mr. Malt’s letters stated that the carried interest “is subject to forfeiture if I cease performing services for the partnership.”
Just who was that “I” is not clear. The trust performed no services, and neither did Mr. Malt. Nor do the Romneys claim to have done any work for the partnerships. Moreover, the Romney campaign says the interest is not subject to forfeiture. In other words, the letters are untrue. When asked, the campaign conceded as much, but said there was no harm in filing the false statements since the tax obligation was not affected.
It appears that Mr. Malt signed some letters he took to be boilerplate without bothering to read or understand them.
Come to think of it, I don’t really know what that means. The Times clearly doesn’t know what that means. I haven’t asked Stephen Hawking, but I’m willing to guess he wouldn’t know what it means either.
But just because I don’t know what it means, that doesn’t mean it matters. Lawyers throw boilerplate mumbo-jumbo into stuff without really understanding it all of the time. I think the Times is going out of its way to create the appearance of mistake, where there is none. They’re trying to make it seem like there were all of these complications, and deals, and potential shadiness, because frankly, it’s a better story if looks that way. But I think if you open up the tax returns on anybody who makes $20 million a year, yet can’t hit a home run or throw a receiver open, you’re are going to find a lot of random boilerplate.
So again, while the whole things seems extremely complicated to those who are not used to the forms, or the terms, or just the general way rich people pay taxes in this country, we shouldn’t act like the people who need to understand these documents needed the Captain Crunch decoder ring to figure them out.
Mitt Romney made $20 million a year, but only paid roughly 15% in federal taxes. Mitt Romney’s proposed tax policies would mean that he would still only pay around 15% in federal taxes. That’s the story here. That’s the only story here. He didn’t do anything illegal, he didn’t cheat, and he didn’t receive egregiously bad tax advice from Ropes & Gray.
He just didn’t pay a higher effective tax rate than most of the people reading this blog. And if he’s elected, he’ll keep the good times rolling for himself and people who make as much as he does in the way he makes it. If that’s not enough of a story for you, I don’t know what to tell you. But the “OMG unintelligible boilerplate” angle isn’t a winner.
Romney Paid More Than He Owed [New York Times]