Offshore Mitt

Offshoring jobs plus offshore bank accounts and investment vehicles adds up to political trouble. Couldn’t happen to a nicer guy.

With the AP following Vanity Fair in going after Mitt Romney’s tangled web of offshore investment vehicles, and Ted Strickland picking up on it on behalf of the Obama campaign, it looks as if Romney’s taste in investment vehicles will join Bain’s record of job destruction in this year’s campaign arsenal.

Josh Marshall argues that the Bain attack matters more to the voters than it does to the pundits. And I bet the same is true of the investment stuff. The average Ohio voter not only doesn’t have a Swiss bank account or a Cayman Islands investment vehicle, he doesn’t know anyone who does.

And of course this gets back to the question about Romney’s taxes, and why he decided to release only one year’s worth of returns. Without actually doing anything you can go to jail for, it’s more than likely that Romney pushed the envelope, hard, when it came to finding ways to pay less than his share of income taxes. (How else do you wind up with $20 million in an IRA, given the IRA contribution limits?)

As Greg Sargent points out, right now the Romney camp hasn’t come up with a plausible counter to any of this. Romney’s response to all questions is, basically, “Trust me.” But a reasonable response, given Romney’s rather distant relationship with truth-telling, is “Trust, but verify. Let’s see the returns.” The very fact of concealment strongly suggests that there’s something to conceal: for example, we still don’t know whether Romney took advantage of the amnesty for those who illegally concealed foreign bank accounts from the IRS. (Of course lots of us made the same inference about Saddam Hussein’s WMD programs, and got it massively wrong. But there’s no evidence that Romney is as crazy as Saddam Hussein.)

All of this plays up both Romney’s remoteness from the problems of strugglign Americans and his basic slipperiness. Expect to hear more of it. And expect it to matter in November.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

14 thoughts on “Offshore Mitt”

  1. Romney knew back in 2008 that he’d be running again in 2012, so it would surprise me if there are any bombshells in the past 4 years. Going back further, though, might yield some juicy tidbits.

    1. I think that Uncle Vinny is safe in betting that Romney’s taxes are immaculate with respect to following the law to the letter, and that they will show that the tax code has been very, very good to him. Romney is willing to fight to the death to preserve, protect, and defend that very code; it is this, and not any possible juicy violations of the tax law, that could sink his ship.

  2. It is possible to roll over a 401(k) plan from a place where you’re no longer working into an IRA (called a rollover IRA). I know, because I have one, with significantly less than $20 million in it. There are, AFAIK, no limits.

    1. True, but there are limits to how much you can put into a 401(k), too. As of 2012, that limit is $17,000 per year. It is very curious that someone could end up with a $20 million IRA.

      1. You can take a company pension (you are probably too young to know people with those) as a lump sum and roll it into an IRA. That can be substantial.

      2. There are other kinds of qualified accounts that can also be rolled into IRA’s where the limits are either much higher or there are no limits. Once the money is in an IRA, there are all kinds of investments that are available to you (except life insurance for some reason). Since I am in a pension plan, I have had an IRA limit of virtually 0 since the 1970″s. Yet my IRA’s are worth quite a bit (not Romney money, but OK).

      3. Just to throw some arithmetic into the discussion, FWIW.

        Put away $20,000 a year for 25 years – roughly the length of Romney’s business career – and earn a 20% return. At the end of that time you will have about $11,300,000.

        If you earn a paltry Madoffian 10% you will have about $2,200,000.

        1. Correction:

          The above ignores the fact that the IRA would of course continue to grow after Romney left private life.

          Add 10 years at 20% and you multiply the number by 6.2. At 10% the multiple is 2.6.

        2. There’s also the pension equivalent of insider trading: you take assets that you know are undervalued, either because you acquired them in a sweetheart deal or because you’re about to do thing that will result in a massive increase in their value, and put them in the IRA. When they increase, you cash out, pay no tax, and invest in something else.

          So for example, you take your IRA savings, invest them in a stock that’s going public, collect the 30-50% first-day pop, rinse, repeat, and pretty soon you might have returns well in excess of 100% a year, tax-free.

          What, you say those kinds of investment opportunities are only available to the financially and politically connected? Envier.

      4. Right, but my employer also kicks in a percentage. $20 million does seem high, but SEP-IRAs for the self-employed have much higher contribution limits, and if you were foolish (or prescient) enough to have invested 100% of your 401(k) in Google’s IPO, you’d probably be doing quite well. Diversification has a downside. 🙂

  3. Richard Nixon’s taxes caused him as much political damage as Watergate, at least in my recollection of the era. People who worked for very modest wages saw that they paid more taxes than the President and they did not like that one bit.

    What do others remember about that time and that issue? I am going by memories of conversations and I may be mistaken about the impact of the taxes in making Nixon increasingly unpopular.

    1. I remember arriving at the news stand in the building where I worked. The headline said something like “Nixon owes a million”. I gasped. The owner of the news stand was acting as if he were giving out candy to the happy excited throng around his stand. Before that the charges had been dramatic but a bit vague about what was the president’s role. THIS WAS A NUMBER. There was now no reason to believe anything that the sleaze bucket said.

      Oh those were fun times. Later a novel came out in which a couple split up after Nixon’s resignation and they realize that the only thing they had held them together was obsessively watching the congressional hearings.

  4. Where’s the money in the Caymans? Start looking for Dr. Maybe’s high-walled enclosure patrolled by bald guys with tattoos and Uzis, a pool with bimbos above water and crocodiles and sharks below, and an underground control centre linked to the X-ray laser satellites.

    BTW, the Cayman Islands are not an independent state like Luxembourg and Panama but a British colony like Jersey. Constitutionally, her Majesty, advised by First Lord of the Treasury David Cameron, can order the offshore trusts to shut up shop tomorrow. Allowing the Caymans &c. to operate as a tax haven is a disgraceful policy of the Foreign Office motivated by penny-pinching. Without it, the British taxpayer would have to shell out a lot of money to keep these dependencies afloat, as France does with its overseas départements.

  5. “The very fact of concealment strongly suggests that there’s something to conceal”

    In the 2000 year-old Shih Ching, the earliest collection of Chinese poetry, there is this line (as translated by Ezra Pound):

    “As is the hidden so is the pattern”

Comments are closed.