John Cassidy speculated as to why Mitt Romney hasn’t released his tax returns for the last 5-10 years in The New Yorker. Here are the reasons he outlined:
1. Extremely high levels of income. According to the tax filings and estimates he released earlier this year, Romney earned about $21.7 million in 2010 and $20.9 million in 2011—most of it from capital gains on investments related to Bain Capital. This is a lot of money, but Romney may well have earned considerably more in earlier years. His ten-year severance agreement with Bain Capital ended in 2009. The terms of it haven’t been revealed, but quite probably it allowed Romney to keep pocketing a substantial portion of the firm’s profits. And the years before 2008 were massively successful ones for Bain and other private-equity firms.
But even if Romney earned fifty million dollars a year in some years, would be that be sufficient reason for him to keep his returns secret? I doubt it. Americans don’t begrudge people a telephone-number income as long as they are perceived to have earned it. And insofar as any private-equity mogul earns the money he makes, Romney earned his. He created Bain Capital and ran it for (at least) fifteen years.
2. More offshore accounts. The Obama campaign has already made much of Romney’s Swiss bank account, his Bermuda-based investment company, and the income he receives from Bain Capital-related trusts that are domiciled in the Cayman Islands. It is perfectly possible that in the years before 2010, Romney and his financial advisers were even more aggressive in their use of overseas investment vehicles and tax shields. Hedge funds and private-equity funds, such as Bain Capital, routinely exploit offshore shell companies, to minimize their tax burdens but also to escape government regulation and oversight.
Here, too, though, I doubt whether this would be sufficient reason to justify not releasing the returns. Thanks to the Obama campaign, Romney’s name is already indubitably linked to offshore accounts. I doubt whether the average American is very shocked. Most people know full well that one of the reasons rich people employ so many fancy accountants and tax lawyers is to shield as much of their income from tax as possible, and that one of the ways they do this is by keeping cash offshore.
3. Politically explosive investments. Over the years, Bain Capital invested in all sorts of companies, including some that helped corporations outsource and offshore some of their operations, and one, a medical-waste-disposal company, that helped family-planning clinics to dispose of aborted fetuses. Romney, even after he left, kept much of his money in investment funds managed by the firm.
First I think all think all of these are true, I would like to speculate on point #3. What if his trust made bets against mortgage CDOs in 2007 or 2008 that delivered a huge return? By 2006 and 2007 the investment banks like Goldman Sachs that built the mortgage CDO industry began to bet against them in the form of credit default swaps usually sold by AIG. Goldman Sachs was the biggest of the profiteers at the expense of the American tax payer to the tune of a direct transfer from the treasury of $13.9 billion dollars which backed AIG’s bets at 100 cents on the dollar. If you add in the $8.4 billion AIG transferred in collateral they would transferred over $20 billion in risk that was covered by the US taxpayer. These default swaps would be extremely profitable for banks like Goldman as rates are similar to buying life insurance at a small premium and hoping they die quickly. What if Romney’s trust showed huge income from these sorts of investments while the US taxpayer was withering on the vine and their taxes were being used to bail out Romney’s hedge fund/investment bank ilk who took on extremely stupid risks? Is there a more made for TV political ad? Is this something the Romney campaign could recover from (I doubt it)? Romney released 10 years of records to the McCain campaign in 2008, some of these could have leaked to Obama campaign and they will be willing to spend all of their TV ad dollars until Romney is forced to release them knowing it will kill his campaign.