This morning's Morning Edition led off with a story that asks some pretty brutal questions about Mitt Romney's tax returns. Romney has been adamant that his 2010 and 2011 returns are all the public will get. But a couple of tax professionals looked at Romney's 2010 return and saw a lot in there that raised their eyebrows.
Lee Sheppard of the journal Tax Notes and Southern Cal law professor Lee Kleinbard were somewhat skeptical about the massive size of Romney's IRA. It's worth at least $21 million, and Sheppard and Kleinbard don't know how Romney could have gotten that much in the account since he could only legally put $30,000 per year in it.
"Either Gov. Romney is sort of the modern-day equivalent of Jack and his magic beans, who somehow created a mighty beanstalk, or he took a very aggressive position with respect to valuing insider stock," Kleinbard says.That's a question we really can't answer with just two years of returns.
Kleinbard means that Romney might have loaded up his retirement account with assets from his private equity firm, Bain Capital, and assigned artificially low values to those assets in order to get around the federal contribution limits.
If so, Romney would still have to pay taxes on the real value of the assets when they're withdrawn from the account. But in the meantime, the money can grow tax-free. Tax Notes' Sheppard says that's an advantage most taxpayers don't have.
"If you happen to work for a partnership and your compensation is arranged this way, you get this very beneficial treatment," Sheppard says.
Kleinbard also had some questions about Romney's tenure as chairman of the audit committee at Marriott--whose founder, J. Willard Marriott, was Romney's namesake. The hotel giant has a reputation among tax experts for going after tax shelters like a moth goes to a flame. According to Bloomberg, back in 1994 Marriott created a tax shelter called "Son of BOSS" designed to create paper losses in order to offset taxes. The IRS challenged it, and in 2009 a court threw it out--costing Marriott $29 million in back taxes. Kleinbard thinks Romney shouldn't have signed off on setting up this shelter.
"It's the job of the chair of the audit committee of Marriott to say, 'Hey, wait a minute, just because we have an opinion from Winkin', Blinkin' and Nod saying that this is a terribly clever idea, I need to apply some common sense as opposed to just signing on the bottom line,' " Kleinbard says.The Bloomberg story highlights another Romney-approved tax strategy that drew the IRS' ire. From 2000 to 2002, it took $1 billion in deductions from an employee stock-purchase plan. The IRS objected, and in 2007 Marriott had to pay $220 million in back taxes.
A statement from Marriott says the company only engages in tax deals it believes are lawful.
"Marriott only engages in transactions that we believe are in accordance with the tax code and that we think will create shareholder value," it said.
Romney has staked his campaign on his business record. But with this much evidence of his questionable handling of taxes, can we really trust him with our money?