As I noted in several prior posts about the reasons that multiple years of the Romneys' tax returns are essential to evaluating Romney as a presidential candidate, the fact that Romney has adamantly refused to release returns other than the 2010 actual return (and the 2011 estimated return) is a cause for concern. Since the established norm is that presidential candidates release 8-12 years of returns, Romney's insistence on not disclosing other returns appears arrogant and disrespectful of voters and suggests that there may be one or more items in those returns that he doesn't want voters to know about. The prior posts included some information about items that could be better assessed with more returns and related information to review, including among others: passive activity losses, questions of whether certain items are hobbies or can legitimately be classed as business expenses, foreign bank accounts, tax shelters, offshore companies, income from Bain Capital, and effective tax rate. Much speculation has centered on the fact that Romney has accounts in various tax haven jurisdictions (Cayman Islands, Bermuda, Singapore) as well as bank accounts in jurisdictions that have been noted for banking secrecy and the accompanying tax evasion possibilities.
Since the US began cracking down on Swiss bank account holders who had avoided their reporting responsibilities, this latter issue has gained considerable visibility. It turns out that many Americans had multi-million dollar accounts abroad that weren't reported and on which they weren't paying taxes. With the breakthroughs facilitated by whistleblowers that threatened an avalanche of information about other bankers, other accounts and other accountholders, many of those lawbreakers came forward to participate in voluntary disclosure programs through which most could pay a penalty and a settled amount for taxes and avoid criminal prosecution. So US taxpayers (and voters) want to know--did the Romneys participate in that disclosure program.
Ed Kleinbard (former chief of staff of the Joint Committee on Taxation and currently at University of Southern California) and Peter Canellos (former chair of the New York State Bar Association Tax Section and current private practitioner) have raised another important issue that would be revealed more clearly with additional tax returns--Romney's participation in abusive tax shelter activity. See Kleinbard & Canellos, Romney's Role in Tax Shelter Raises Questions, CNN op-ed (Aug. 8, 2012). The authors note that Romney's limited release of tax returns doesn't "dispel the legitimate concerns that arises from hints buried in his scant disclosure to wealth." But they note that a "relevant line of inquiry" is "what exists in the public record regarding his attitude toward tax compliance and tax avoidance." So they decide to see what that might be. They find something troubling--his acceptance of abusive tax shelter activity by large multinational corporations when he headed Marriott International's audit committee and approved the company's involvement in a Son of Boss deal, a transaction undertaken purely for tax purposes to create artificial losses that would then be used to offset real gains from business activities and thereby substantially reduce the company's tax bills.
A key troubling public manifestation of Romney's apparent insensitivity to tax obligations is his role in Marriott International's abusive tax shelter activity.
*** From 1993 to 1998, Romney was the head of the audit committee of the Marriott board.
During that period, Marriott engaged in a series of complex and high-profile maneuvers, including "Son of Boss," a notoriously abusive prepackaged tax shelter that investment banks and accounting firms marketed to corporations such as Marriott. In this respect, Marriott was in the vanguard of a then-emerging corporate tax shelter bubble that substantially undermined the entire corporate tax system.
*** [T]he government initiated legal challenges that resulted in complete disallowance of the losses claimed by Marriott and other corporations. *** [T]he government brought successful criminal prosecutions against a number of individuals involved in Son of Boss. ***
In his key role as chairman of the Marriott board's audit committee, Romney approved the firm's reporting of fictional tax losses exceeding $70 million generated by its Son of Boss transaction. His endorsement of this stratagem provides insight into Romney's professional ethics and attitude toward tax compliance obligations. (emphasis added)
So Romney as "businessman" (his claimed primary qualification for serving as President) was happy to sign off on tax scam transactions intended to benefit his corporation at the cost of ordinary taxpayers who are called upon to make up the difference in higher rates of borrowing by the federal government or higher taxes. Can Romney hide behind the excuse of--Oops, I was just an unsophisticated board member who relied on tax advisers and couldn't be expected to understand such complex transactions and tax issues? No way. As Kleinbard and Canellos note in their op-ed:
In his key position as head of the board's audit committee, Romney was required under the securities laws and his fiduciary duties to review the transaction. In fact, it has been publicly reported that Romney was the Marriott Board member most acquainted with the transaction and to whom the other board members turned for advice. This makes sense because aggressive tax-driven financial engineering was a large part of what Romney (and Bain) did for a living. For these reasons, it is fair to hold him accountable for Marriott's spurious tax reporting.
*** [Romney] had an insider's perspective on the motivation and lack of substance in the transaction, as well as the financial sophistication to understand the tax avoidance involved. Romney failed in his duties to Marriott and its shareholders and acted to undermine the fairness of the tax system. (emphasis added).
These issues are critically important to Romney's purported qualifications to serve as president. A man who is willing to bend/break the rules in order to make more money for himself and his elite buddies doesn't belong in the White House.