First, let me admit this is pure speculation, but it is informed speculation. So this diary will be very short.
As George Wills said, Mittens has done a cost benefit analysis, and has concluded that the cost of releasing his tax returns is much higher than the cost to his campaign of continued stonewalling, which makes him look shady, secretive, and dishonest -- all death rays for a presidential candidate.
So what could be worse than that? My speculation, based on increasing speculation in the blogosphere, is that Mitt paid no taxes in some years, and especially in 2009. Here's the explanation.
First there is this very interesting article in Business Week. The author, Joshua Green, talked to other private equity managers. None of them had inside information about Mitt's taxes, but they did have first hand information about what happened in the industry and to rich one percenters in 2008-2009, the years of financial meltdown. Contrary to a widespread belief in the progressive blogosphere that one percenters somehow were shielded from the carnage in those years, the little group that spoke to Green says that the super rich lost super large amounts of money. We know, for example from other sources, that Harvard's endowment lost tens of billions in the meltdown. As the one percenters put it to Green, there was no where to hide in 2008-2009. Almost all investments crashed including "safe" investments like triple A mortgage backed securities, which the one percenters had been lulled into thinking of as being as safe as treasury bonds or cash:
When the stock market collapsed in 2008, the wealthiest investors fared worse than everyone else. (See, for instance, this Merrill Lynch study.) The “ultra-rich”—those with fortunes of more than $30 million—fared worst of all, losing on average about 25 percent of their net worth. “There was really nowhere to hide as an investor in 2008,” Merrill Lynch’s president of global wealth management pointed out in 2009. “No region ended the year unscathed.”
As a member of the ultra-rich, Romney probably wasn’t spared major losses. And it’s possible he suffered a large enough capital loss that, carried forward and coupled with his various offshore tax havens, he wound up paying no U.S. federal taxes at all in 2009. If true, this would be politically deadly for him. Even assuming that his return was thoroughly clean and legal—a safe assumption, it seems to me—the fallout would dwarf the controversy that attended the news that Romney had paid a tax rate of just 14 percent in 2010 and that estimated he’d pay a similar rate in 2011.
Although I take issue with the idea that the super rich were hit harder than the rest of us -- after all, losing tens of millions of paper worth is not as bad as losing a job and a home -- there's little reason to believe that Mittens was spared such paper loses. The result would be gigantic write offs for Mitt's investments -- even in his offshore tax havens.
These losses could be applied against income, and combined with his usual deductions for things like dressage horses ("prancing ponies are people too my friend," on wit on HuffPo wrote), it's likely that Mitt's deductions and losses zeroed out his tax liability.
Another reason I believe he paid zero income tax is the Obama campaign's new ad, "Makes You Wonder." This is not an ad from some progressive political group unconnected to the Obama campaign; this is the Obama campaign and it begins with President Obama's voiceover saying he approved this message. The ad speculates, "makes you wonder whether in some years he paid any taxes at all ..." Do you think a disciplined operation like the Obama campaign would make such a speculation if it could later be proven false to their embarrassment? Homey don't think so. I think they have reliable information that this speculation is warranted, or else they wouldn't make such a bombshell accusation under their own name.
So, again, this is speculation, but it's informed speculation: I would actually be more shocked considering the damage done in 2008-2009 if Romney did pay taxes than if he didn't, and zero taxes paid by a super millionaire may be the iceberg that sinks the Mittanic.
UPDATE: Holy Cow, guys, as Phil Rizzuto used to say! Thanks for frontpaging me to the Community Spotlight!