Mitt Romney won’t release his tax returns beyond two years in which he was already actively campaigning for president, and the political press seems to have forgotten about it since Romney’s early October surge in the polls.
So it’s left to the investigative journalists to dig up bits and pieces of Romney’s tax-avoidance strategy. What we get is far from a complete picture, but it shows how the system is stacked in favor of our plutocrats, who often pay lower taxes than middle class families.
Bloomberg’s Jesse Drucker, who has been reporting on Bain Capital and Romney’s taxes, has another excellent report on how the candidate used obscure loopholes to avoid paying the government what he owed. Drucker has written about Romney’s intentionally defective grantor trust, showed how he helped Marriott scam (John McCain’s word) the IRS.
For this one, Drucker used the Freedom of Information Act to get records about another Romney trust, which uses the Mormon church’s tax-exempt status to save him from paying taxes, parking money there to defer tax bills while keeping almost all of the proceeds himself.
Effectively, the Romneys put up a trust that pays them 8 percent of its assets a year until they die, at which point the Mormon church gets what’s left in the account.
Congress restricted this tactic, the so-called charitable remainder trust, a year later after being abused by rich tax avoiders, but Romney’s was grandfathered in.
When Romney’s lawyers and accountants created it, the church was supposed to end up with just 8 percent of its assets, while Romney got 92 percent. But the investments haven’t been doing well, so Romney’s withdrawals, at 8 percent a year, have been steadily reducing the money in the trust, and Bloomberg quotes an expert saying the church will eventually get “probably close to nothing.” Romney makes out regardless while the other stakeholders—his church and the government—lose out. It’s basically the private-equity business model brought to tax planning.
The current investing strategy favors the Romneys over the charity because they get a guaranteed payout, said Michael Arlein, a trusts and estates lawyer at Patterson Belknap Webb & Tyler LLP.
“The Romneys get theirs off the top and the charity gets what’s left,” he said. “So by definition, if it’s not performing as well, the charity gets harmed more.”
This isn’t to say that Romney hasn’t given generously to the Mormon church. He has, though of course that tithing also lowers his taxes significantly. But he’s not above using the church like this so he can keep his tax bill below 15 percent.
— Further Reading:
Romney’s gift to reporters. A Bloomberg investigation details yet another aspect of the candidate’s tax firstname.lastname@example.org. Follow him on Twitter at @ryanchittum. Tags: Bloomberg News, Jesse Drucker, Mitt Romney, taxes