Senate Majority Leader Harry Reid says he spoke to a highly placed source at Bain Capital and was told former Massachusetts Governor Mitt Romney hasn't paid any federal taxes for 10 years. Let the weeping and gnashing of teeth begin.
The head of the Republican Party called Reid a "dirty liar". Republican senators attacked Reid for making "baseless" accusations. Still others accused Reid, and President Obama, of using Romney's tax returns as a distraction from the real issue in this election, the economy. Romney himself told Reid to "put up or shut up". Other than Romney himself, however, the rest of Reid's critics have no idea if the accusation is true or not.
Romney could end all of this speculation quickly. If he were to release the last five years of tax returns, he could embarrass Reid and Obama and end this kind of talk once and for all. Romney could end this distraction which Republicans say they decry. Yet, Reid and Obama seem to believe he will not release any more taxes and the accusations will continue to fly. With prominent Republicans also calling on Romney to release more information, the question which hangs out so obviously is why he won't release more returns? The implication of his actions suggests where there is smoke, there's fire...there is something to hide.
I have no idea if Romney paid taxes or not. However, given how rich he is, and given his use of tax shelters in the Bahamas and Grand Cayman Islands, and his use of Swiss bank accounts, it is easy to see how he could have used tax loopholes and exemptions to shelter the vast majority of his income from the I.R.S.
If Romney avoided taxes on hundreds of millions of dollars in income, I guarantee every step he took, every deduction he claimed was completely legal. I do not believe for one minute Romney committed any crime or fraud in figuring out ways to avoid a large tax bite. The tax code is designed so the more money you have, the easier it is to avoid taxes. Corporations, trusts, offshore accounts can all be used to shelter your money. There are people who arrange to lose money on deal in December that they will recoup in January, but they still get to write off the loss in the previous year. Rich owners of sports teams can even depreciate the value of the athletes in their employ. Perhaps my favorite provision allows the rich to spend money lobbying Congress for more tax breaks and then deduct that money as a business expense and reduce their tax burden even more.
In Romney's case, since the majority of his income appears to come from investments, this income is considered "carried interest" and gets taxed at a 15% rate rather than 36%. This quickly reduces his taxes even though there is no evidence "carried interest" provisions have resulted in increased investment or the creation of large numbers of new jobs (the argument which was made when lobbyists pushed this loophole asking for investment income to be treated differently than earned income).
Romney "legally" may not have paid any taxes for 10 years. He followed the rules. Yet, he knows his presidential hopes would be dashed if middle class Americans found out he made tens of millions of dollars and didn't pay any federal taxes on them. Romney would be toast as far as Americans who make between $100,000-200,000 are concerned. They are hammered year in and year out by all kinds of taxes and particularly by the Alternative Minimum Tax, which eliminates many standard deductions and dramatically raises their tax bill. Romney appears to have figured out how to avoid the AMT and this will not endear him to successful, but still middle class, voters.
Perhaps this is unfair. Why should Romney be excoriated for using the arcane tax rules to his benefit? Why should he suffer because he can afford tax lawyers and accountants who can hide or shelter his income? Why should his hopes for the White House suffer because he knows how to play the game?
90% of all Americans could do their taxes on the back of a postcard. One blank for income...a second for standard deductions and a third for the result of subtracting one from the other. The thousands of pages of tax laws are for those who want some way to claim they didn't make as much as they really did. Unfortunately, most Americans cannot take advantage of all these escape hatches and they pay what the government demands.
If Romney were to release returns which show he avoided paying taxes while most Americans were paying through the nose, he knows, and most of his rich colleagues know, there would be a wave of anger which would wash across this country and a call for real tax reform would echo from sea to shining sea. (It should happen anyway.) Romney, and his ilk, are paying taxes at the lowest rates since the 50's. Revenue from taxes, into the government treasury, is down by more than 1/3. Rebuilding bridges and roads...creating a new and reliable electrical grid...improving education and providing funding for cutting edge research and innovation...retraining workers...are all vital tasks needed to keep our nation competitive and keep the American dream of a strong middle class alive. A system that allows the rich, and corporations, to game it for their individual benefit corrodes trust and confidence in the system as a whole.
Harry Reid may be a liar, or he may be telling the truth, but Romney is the only one who knows and he ain't talkin'. Why not?