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Mitt Romney
Wall Street Journal:
In response to the ABC News report that focused on investments by Mr. Romney in a “notorious tax haven,” Mr. Romney’s campaign said: “ABC is flat wrong. The Romneys’ investments in funds established in the Cayman Islands are taxed in the very same way they would be if those funds were established in the United States. These are not tax havens and it is false to say so.”

But that might not be true:

However, tax experts said that had Mr. Romney’s IRA invested in Bain funds in the U.S., he would likely have been forced to pay an obscure levy called the “unrelated business income tax,” also known as UBIT.

This tax, assessed for individuals at a maximum 35% rate, is meant to discourage tax-exempt entities such as an IRA or college endowment fund from unfairly competing with for-profit, taxpaying entities by operating a business without paying taxes on it. Investing in a partnership such as a Bain Capital fund that uses debt to buy companies would trigger the tax, experts said.

Romney's campaign denies that their candidate sought to avoid the 35 percent UBIT tax, but they seemed to acknowledge Romney was taking advantage of a rule created to give an advantage to people in his position:

The aide also said: “The IRS created these special rules to ensure IRA’s could remain tax deferred like they were intended to be.  There is no ‘avoidance.’”

Romney's IRA could have as much as $100 million in it, and when he begins withdrawing funds, they will be taxed at a rate of 35 percent, not the 15 percent of long-term capital gains. However, all the taxes will have been deferred, allowing him to accumulate capital more quickly.

Ultimately, however, we don't really know what the full story is—and unless Romney releases his tax returns going back to 2000, just like President Obama has, we will never know. So far, at least, nobody is saying Romney broke any laws. But if he were to release his tax returns, we'd get a much clearer idea of the extent to which he personally would benefit from keeping current tax policy in place. And that, more than anything else, may be why he's so reluctant to let the full story come out.

Originally posted to The Jed Report on Thu Jan 19, 2012 at 12:45 PM PST.

Also republished by Daily Kos.

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