What Is Mitt Romney Hiding?

August 7, 2012

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Mitt Romney, former governor of Massachusetts,...

Mitt Romney

Harry Reid is saying that Mitt Romney didn’t pay taxes in past years.  Romney has released his 2010 tax return and will release the 2011 return when it is ready – but that’s a far cry from the 12 years of tax returns that his father released when George Romney ran for president.

Republican leaders are calling Reid a liar, and the result of the entire exchange is that there’s as much focus on Mitt Romney’s taxes as there is on how to solve the current unemployment problems.

That begs the question:

What is Mitt Romney hiding?

There are several possibilities.  Some are far more likely than others.

  • Romney is not hiding anything – The returns from the last ten years may be near carbon copies of 2010, and Romney may be refusing to release the earlier returns on principle alone.  In my opinion, this would be a bad decision, as the failure to release earlier returns gives the definite appearance that he is hiding something.
  • Romney is committing tax fraud – It’s also possible that Romney is committing outright fraud, either by failing to report income or by taking illegal deductions.  However, unless Romney and his legal tax are complete morons, this seems a pretty remote possibility.
  • Romney was born in Kenya – Romney may be paying millions in taxes to the Kenyan treasury
  • Romney paid $0 tax in some years – This is actually quite possible.  I’m sure that Mitt’s stock portfolio has taken a hit in several recent years.  It’s quite possible that he sold stock to lock in capital losses that would offset other income. 
  • Romney had very high income – On the flip side, if Romney had a bad feeling about the market, he may have sold stock to lock in gains.  Are there years where Romney had $20, $50, or $100 million in income?  It’s definitely possible.  it’s even possible that he locked in huge gains as the market was plummeting.

Something to keep in mind is that a capital gain is often the result of many years or accumulation.  For the sake of argument, let’s say that Romney had a $100 million capital gain in 2008. The stocks in his portfolio may have appreciated over a span of 20 or 30 years, and a rate of a few million per years.  Sure, that’s a lot of money, but it’s not as if Romney opened an eTrade account one day and reaped a $100 profit the next.  The huge gain may have been recognized in 2008, but it was building up gradually over the years.

Likewise, if Romney locked in some capital gains in an effort to drop his income to $0, these losses may also have been building up for years or decades.

If you care about how much money politicians make, you really should be focusing on the average income over a long span of time, rather than cherry picking a handful of years.  If someone earns $50 million for each of five consecutive years, this is a higher total income that a person who has $0 in income the first four years and $150 million in the fifth year – even though the $150 million catches they eye.

Honestly, as long as Romney fairly reported income and deductions and paid the proper amount in taxes, I really don’t care how much he paid in taxes.  His effective rate is fairly low due to the fact that most of his earnings are capital gains.  That’s not Romney’s fault – that’s simply the way the tax code is written.



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8 Comments (+add yours?)

  1. Martin Kelly
    Aug 07, 2012 @ 16:13:08

    Apparently, the latest twist on this tale is that Romney may have over $100 Million in his 401k. The guys on MSMBC suggeste that this proves he is not fit to be president since he super rich and cannot possibly understand Americans. I don’t know why this matters, since there are many very rich politicians, but to some commentators, it does.


  2. kosmo
    Aug 08, 2012 @ 08:44:07

    Funny thing is, if you adjust for inflation, he wouldn’t even be the richest president.

    Surely the richest president in history – with an inflation-adjusted net worth of more than a half billion dollars – simply bought the office and wasn’t fit to be president. Probably left behind a terrible legacy, right?

    George Washington.


  3. Squeaky
    Aug 08, 2012 @ 11:57:01

    Interesting. I always think it’s odd that they release tax documents at all. If I were Biden I wouldn’t want to release any because he’s always made fun of for not making any charitable donations. If he’s loaded, good for him…he understands business and how to make money. We need that right now more than ever. Maybe he will hold some Uncle Mitt’s story time sessions and teach some of the CEO’s how to turn a profit.

    This is intersting. Jimmy Carter only released three years of returns when he ran. I wonder if people had a fit then. http://www.taxhistory.org/www/website.nsf/web/presidentialtaxreturns
    Gerald Ford didn’t release any returns, just a summary of the data.

    I’m shocked about Geo Washington…crazy! Now that I know this, I’m going to Ogden, UT and handcuffing myself to the IRS front doors there.


  4. Zarberg
    Aug 08, 2012 @ 17:13:26

    The thing that bothers me the most out of this whole not releasing your tax returns thing is Mitt used John Kerry’s wife as an example of why he shouldn’t have to show his returns. I just … don’t get that. It’s either childish or a complete fail on logic.


  5. Squeaky
    Aug 08, 2012 @ 23:22:46

    @Zarberg…I’m not sure I understand. Are you saying that his argument isn’t valid? So a candidate can bury income in their spouses name then only release the one set of records and that is OK? Let me know if I’m missing the point.

    It sounds to me like he’s trying to remind people that the Kerry’s have more money than the Romney’s.


  6. kosmo
    Aug 09, 2012 @ 09:09:55

    You could argue that it’s not particularly valid because Romney isn’t running against John Kerry.

    I never got the impression that Kerry was burying income in his wife’s name. My impression was more that he was a kept man 🙂

    I look at the Romney situation this way:

    If he release his returns, people will think he’s rich.

    If he doesn’t release his returns, people will still think he’s rich, and will also wonder if he’s hiding something.

    So, basically, the “people think he’s rich” completely cancels out, leaving no apparent downside to release them.


  7. Peter Shaw
    Aug 09, 2012 @ 12:50:58

    It’s interesting that this is being debated when Harry Reid has no sources. Everyone knows Romney had realease 2010 tax, thats a fact. Harry knows his source is a liar and Reid promulgates the lie. The fact is we know more about Romney than we do of President Obama who has been a president and candidate for six years. A candidate’s tax return is pretty low on my list of my worries when selecting a leader.


  8. kosmo
    Aug 09, 2012 @ 13:52:14

    I don’t think Romney himself has specifically addressed whether there are years he paid not taxes. The responses I have always seen from him is that he has always paid taxes due per the tax code.

    I wouldn’t be shocked if there were year(s) where he paid $0 in taxes. I’m sure he took some losses in the market earlier in the decade. At some point, you sell the stock and write off the loss. There’s absolutely nothing wrong with that.


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