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David Cay Johnston: To calm the storm, Romney should release returns for 1984–1999 (the Bain years)

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In an earlier post I focused on Mike Papantonio's concerns about Mitt Romney involvement in Cayman Island offshore banks (actually secret investment trusts).

There I also alluded (incorrectly as it turns out) to David Cay Johnston's issues, which are not the same as Papantonio's. Those issues deserve examination on their own, especially given Johnston's widely-admitted expertise on the U.S. tax code and its implications.

In a recent article Johnston wrote (my emphasis throughout):

If Mitt Romney makes good on his promise during Thursday night’s Republican candidates’ debate to release “multiple years” of his returns, it will likely stir up rather than calm the political storm unless he makes public all of his returns from 1984 through 1999. Those are the years when he built a fortune of more than $200 million while running Bain Capital Management.
While Johnston is sure that Romney has done nothing illegal, his concerns fall into three categories:

       ▪ The "carried interest" loophole that allows his income to be earned now and taxed later (I may start calling this the Wimpy Loophole)

       ▪ His Cayman Island accounts

       ▪ The $100 million trust fund for his sons

Here's Johnston on the "carried interest" loophole and the Cayman Island accounts:
[I]nvestment partnership managers like Romney, who cofounded Bain Capital Management and ran it for 15 years ... can earn compensation now and pay taxes later, decades later if they want. It’s called “carried interest.” ...

Unless he releases the tax returns from his Bain Capital years he will surely be pressed about how much, if any, of his fortune has yet to be taxed and how long he deferred paying on the portion that has been taxed. He will be asked about Bain accounts in the Cayman Islands, Bermuda and other tax havens. While perfectly legal, these offshore accounts convey an unsavory political whiff to many people, including some of his rivals for the Republican presidential nomination.
About the $100 million trust fund, Johnston would like to know how that money was taxed.

The article is clear and to the point, with several "inside the tax code" observations. (There's even a nice Nixon revelation, lost to memory, that Johnston unearths; I'll leave you to find and enjoy that for yourself.)

My own view is that if people like Krugman and Johnston are right and Papantonio is wrong (see here), we may well see more than one Romney return (though likely not enough to allay Johnston's concerns). When will we see them? How about at the last minute possible, and only with the presidency on the line.

But if Papantonio is right and those Cayman Island investment partners are beneficiaries of political favors — Papantonio is a very successful mass torts lawyer and thinks like one — I don't think those earlier returns will ever be revealed. We'll only see scrubbed ones, and only from scrubbable years.

A real high-wire act Mr. Romney is putting on. I would not want his stomach acid right about now.


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