I’m not a big fan of Mitt Romney. I hammered him the day before Christmas for being open to a value-added tax, and criticized him in previous posts for his less-than-stellar record on healthcare, his weakness on Social Security reform, his anemic list of proposed budget savings, and his reprehensible support for ethanol subsidies.
But I also believe in being intellectually honest, so I’ll defend a politician I don’t like (even Obama) when they do the right thing or when they get attacked for the wrong reason.
In the case of Romney, some of his GOP opponents are criticizing him for job losses and/or bankruptcies at some of the companies in which he invested while in charge of Bain Capital. But I don’t need to focus on that issue, because James Pethokoukis of AEI already has done a great job of debunking that bit of anti-Romney demagoguery.
In this post, I want to focus on the issue of tax havens.
Regular readers know that I’m a big defender of these low-tax jurisdictions, for both moral and economic reasons, and I guess that reporters must know that as well because I’ve received a couple of calls from the press in recent weeks. But I suspect I”m not being called because reporters want to understand international tax policy. Instead, based on the questions, it appears that the establishment media wants to hit Romney for utilizing tax havens as part of his work at Bain Capital.
As far as I can tell, none of these reporters have come out with a story. And I’m also not aware that any of Romney’s political rivals have tried to exploit the issue.
But I think it’s just a matter of time, so I want to preemptively address this issue. So let’s go back to 2007 and look at some excerpts from a story in the Los Angeles Times about the use of so-called tax havens by Romney and Bain Capital.
While in private business, Mitt Romney utilized shell companies in two offshore tax havens to help eligible investors avoid paying U.S. taxes, federal and state records show. Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands. But aides to the Republican presidential hopeful and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Romney’s former company, Bain Capital, and thus boosted profits for Romney and his partners. …Romney was listed as a general partner and personally invested in BCIP Associates III Cayman, a private equity fund that is registered at a post office box on Grand Cayman Island and that indirectly buys equity in U.S. companies. The arrangement shields foreign investors from U.S. taxes they would pay for investing in U.S. companies. …In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital’s Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans. Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer’s office in downtown Hamilton, capital of the British island territory. … Investing through what’s known as a blocker corporation in Bermuda protects tax-exempt American institutions, such as pension plans, hospitals and university endowments, from paying a 35% tax on what the Internal Revenue Service calls “unrelated business income” from domestic hedge funds that invest in debt, experts say. …Brad Malt, who controls Romney’s financial trust, said Bain Capital organized the Cayman fund to attract money from foreign institutional investors. “This is not Mitt trying to do something strange,” he said. “This is Bain trying to raise some number of billions from investors around the world.”
There are a couple of things worth noting about these excerpts.
1. Nobody has hinted that Romney did anything illegal for the simple reason that using low-tax jurisdictions is normal, appropriate, and intelligent for any business or investor. Criticizing Romney for using tax havens would be akin to attacking me for living in Virginia, which has lower taxes than Maryland.
2. Jurisdictions such as Bermuda and the Cayman Islands are good platforms for business activity, which is no different than a state like Delaware being a good platform for business activity. Indeed, Delaware has been ranked as the world’s top tax haven by one group (though American citizens unfortunately aren’t able to benefit).
3. America’s corporate tax system is hopelessly anti-competitive, so it is quite fortunate that both investors and companies can use tax havens to profitably invest in the United States. This helps protect the American economy and American workers by attracting trillions of dollars to the U.S. economy.
These three points are just the tip of the iceberg. Watch this video for more information about the economic benefit of tax havens.
Last but not least, here’s a prediction. I think it’s just a matter of time until Romney gets attacked for utilizing tax havens, though the press may wait until after he gets the GOP nomination.
But when those attacks occur, I’m extremely confident that the stories will fail to mention that prominent Democrats routinely utilize tax havens for business and investment purposes, including as Bill Clinton, John Kerry, John Edwards, Robert Rubin, Peter Orszag, and Richard Blumenthal.
It’s almost enough to make you think this cartoon is correct and that the establishment press is biased.
[…] 10 days ago, I predicted that the press would attack Mitt Romney for using tax havens. In that post, I wrote that, “…based on the questions, it appears that the establishment media […]
[…] instead of writing about tax havens, as I’ve done in the past, today we’re going to look at incremental tax […]
[…] a presidential campaign where the President’s campaign viciously attacked Mitt Romney for doing exactly the same thing as Jack Lew. And now the White House is pointing out the same thing I pointed out about Romney – that […]
[…] a presidential campaign where the President’s campaign viciously attacked Mitt Romney for doing exactly the same thing as Jack Lew. And now the White House is pointing out the same thing I pointed out about Romney – that […]
[…] this year, I defended Mitt Romney and Bain Capital from the absurd accusation that they did something wrong by utilizing low-tax […]
[…] I may have been focusing on the trees and missed the forest. By highlighting the perfectly legal nature of Romney’s investments and commenting on the valuable role of tax havens in the global economy, I’ve neglected the main […]
[…] recent months, almost all of the media calls have been because (gasp!) Mitt Romney engaged in sound business practices and used tax havens to boost earnings while also legally minimizing the amount of money siphoned […]
[…] recent months, almost all of the media calls have been because (gasp!) Mitt Romney engaged in sound business practices and used tax havens to boost earnings while also legally minimizing the amount of money siphoned […]
[…] instead of writing about tax havens, as I’ve done in the past, today we’re going to look at incremental tax […]
[…] instead of writing about tax havens, as I’ve done in the past, today we’re going to look at incremental tax […]
[…] If you want a quick and serious explanation of why the “tax haven” charge against Romney is without merit, feel free to peruse this post. […]
“Given the precedent set by past seven Presidents and Presidential candidates of releasing multi-year tax returns why is Romney making an exception?” Because he has a lot to hide, apparently.
He’s the only one that knows what’s in there, and apparently he’s made the judgement that he’s better off having us suspect the worst, rather than us knowing whats in there, which apparently in his mind is worse than anything we’re likely to imagine.
Possibilities include:
(1) He ended up with 120 million in his 401K by the trick of agreeing with Bain to grossly undervalue the market value of his stock, then a few years later have the stock get unvalued to the stratosphere.
(2) He participated in the tax avoidance amnesty program of a few years back, avoiding major tax penalties or prosecution.
(3) Any one or more of the other borderline legal but very bad smelling tax dodges– “in-kind” trades, “no-risk” trades, no-risk write-offs, the list is almost endless.
And BTW he HASNT even released all of his 2010 return, he very conveniently left off the foreign investments and deposits form. Very convenient.
And his argument that it would be “bothersome” to collect the tax data is a crock too– he supposedly collected 23 years of the stuff to show to McCain in 2008.
Ajay Jain===================================================================================
Republicans betrayed their own conscience when they went against established Republican principles like the MANDATE over healthcare which was a Heritage foundation issue popularized by Gingrich.
Obama did more than his share to UNITE but the Republicans were out to oppose for opposing sake and not following any policy or principles. In the famous words of Minority Senate Leader Mitch McConnell the Republicans were out to defeat the Obama agenda even if it went against established Republican policies set by past precedent.
Mitch McConnell was out to make sure that President Obama remains a one term President and see where it has brought the Congress and its public esteem.
Gingrich out of his own admission was out to defeat Obama from the day he was sworn in as President.
You can not justify the Republicans as the “loyal” opposition as is the case in most mature democracies. They have been out to get President Obama by hook or by crook. A leader can meet the opposition half way but can not fold completely to their whims and fantasies like that of the current Tea Party affiliates.
Republicans will loose in 2012 just like they did in 2008 but with a smaller margin because of the dark money of Billionaires due to Citizens United verdict of the right wing Supreme Court.
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” … Mitt Romney senior adviser Ed Gillespie said Sunday on CNN’s “State of the Union” the GOP candidate “retroactively” retired from Bain Capital after the 2002 Salt Lake City Olympics began. … ”
No body who has been drawing at LEAST $100,000.00 per year from 1999 to 2002 from Bain Capital “retroactively” retires from Bain Capital AFTER the 2002!!! Then why draw the salary of at LEAST $100,000.00 per year from 1999 to 2002 from Bain Capital if Romney retired from Bain “retroactively” !!!
” … Gillespie continued, “He took a leave of absence and, in fact, Candy, he ended up not going back at all and retired retroactively to February of 1999 as a result.” … ”
However SEC documents show Mitt Romney as sole owner of all shares of Bain Capital. Romney is also shown as CEO, President and Chairman of Board of Bain Capital in 2001 and 2002 then LEGALLY speaking Mitt Romney has been responsible to all that goes on under the banner of Bain Capital. Then to run for Governor of MA Romney sought residency of MA by lieu of his Bain positions. Now either Romney was at the Olympics OR he was at BAIN.
Only one can be true not BOTH at the same time simultaneously!!! Will the true Willard Mitt Romney stand up and accept ONE thing? Does Romney want to accept untrue SEC filings and be called a Felon or agree that he represented Bain from 1999 to 2002?
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On Friday the 13th (7/13/2012) the very illusive Mitt Romney gave very defensive interviews to all FIVE networks on a single day at once!! Just a few days ago Mitt Romney said to FOX News that explaining means that you are WEAK. So his five interviews “explaining” his time at Bain were signs of his weakness!!
Presidential Candidate Mr. Mitt Romney maybe feeling the heat on his role in BAIN Capital, his business experience which was supposed to be his sole criteria for creating jobs and his greatest qualification for running for the American Presidency in the current economy in 2012!
However SEC documents show Mitt Romney as sole owner of all shares of Bain Capital. Romney is shown as CEO, President and Chairman of Board of Bain Capital in 2001 and 2002 then LEGALLY speaking Mitt Romney has been responsible to all that goes on under the banner of Bain Capital.
Mitt Romney can not just share the good like job creation from 1999 to 2002 and leave the ugly like Bankruptcies and layoffs behind as if he had nothing to do about them from 1999 to 2002.
If he really wanted to disassociate himself from Bain Capital he could have resigned and sold all his shares in Bain Capital in February 1999 then it would have been a different matter but to share in the glory of Bain’s job creation accept a salary of $100,000 or MORE (where are the Tax Returns?) for three years and only to refuse to take the responsibility of Bankruptcies and layoffs on his WATCH (1999-2002) is trying to have it both ways and then complaining of playing politics having been caught with his hand in the proverbial Cookie Jar that is the very essence of an ACTIVE LEGAL ROLE in Bain Capital till 2002!! Was Romney getting $100,000.00 or more to do NOTHING for BAIN Capital???
Mitt Romney will have to face the consequences of this leaving Bain “lie” that Mitt Romney has brought on upon himself. If we keep reminding the Romney campaign of the Bain exit lie and Romney’s ill effects on workers robbing them of their hard earned salaries and life long benefits all the way to November then 7/13/2012 (FRIDAY the 13th) will go down as the turning point of the 2012 Presidential election!
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Two-Faced Willard
“I was not responsible for what happened at Bain Capital” – Mitt Romney
“I was the Sole shareholder, Sole director, Chief executive officer and President of Bain” – Mitt Romney
“The Arizona immigration policy is a good model” – Mitt Romney
“I didn’t really support the Arizona immigration policy” – Mitt Romney
“The Massachusetts healthcare plan should be a model for the nation” – Mitt Romney
“Healthcare reform should be left to the states” – Mitt Romney
“Let Detroit go bankrupt” -Mitt Romney
“I’ll take a lot of credit for saving the auto industry” -Mitt Romney
“I believe Roe v Wade has gone too far.” – Mitt Romney
“Roe v Wade has been the law for 20 years we should sustain and support it.” – Mitt Romney
“I respect and will protect a woman’s right to choose.” – Mitt Romney
“I never really called myself pro-choice.” – Mitt Romney
“It was not my desire to go off and serve in Vietnam.” – Mitt Romney
“I longed in many respects to actually be in Vietnam and represent our country there.” – Mitt Romney
“I’m not trying to return to Reagan-Bush.” – Mitt Romney
“Ronald Reagan is… my hero.” – Mitt Romney
“I think the minimum wage ought to keep pace with inflation.” – Mitt Romney
“There’s no question raising the minimum wage excessively causes a loss of jobs.” – Mitt Romney
“I saw my father march with Martin Luther King.” – Mitt Romney
“I did not see it with my own eyes.” – Mitt Romney
“I would like to have campaign spending limits.” – Mitt Romney
“The American people should be free to advocate for their candidates without burdensome limitations.” – Mitt Romney
“I supported the assault weapon ban.” – Mitt Romney
“I don’t support any gun control legislation.” – Mitt Romney
[…] this year, I defended Mitt Romney and Bain Capital from the absurd accusation that they did something wrong by utilizing low-tax […]
[…] I may have been focusing on the trees and missed the forest. By highlighting the perfectly legal nature of Romney’s investments and commenting on the valuable role of tax havens in the global economy, I’ve neglected the main […]
[…] I may have been focusing on the trees and missed the forest. By highlighting the perfectly legal nature of Romney’s investments and commenting on the valuable role of tax havens in the global economy, I’ve neglected the […]
[…] this year, I defended Mitt Romney and Bain Capital from the absurd accusation that they did something wrong by utilizing low-tax […]
I admire the way you “utilitize” the English language. You’re pretty smart for a conservative blowhard! [snicker]
[…] And if you want to show your ignorance of investment by bringing up the Swiss and Cayman accounts, go here. […]
[…] points, but the anti-Romney video is simplistic and the entire premise is false. He’s not hiding anything. Intelligent satire uses the truth as a starting point. This video […]
[…] 10 days ago, I predicted that the press would attack Mitt Romney for using tax havens. In that post, I wrote that, “…based on the questions, it appears that the establishment media […]
[…] 10 days ago, I predicted that the press would attack Mitt Romney for using tax havens. In that post, I wrote that, “…based on the questions, it appears that the establishment media […]
[…] 10 days ago, I predicted that the press would attack Mitt Romney for using tax havens. In that post, I wrote that, “…based on the questions, it appears that the […]
Of course the way to solve the problem is to give the good old USA an investor friendly tax code. Unfortunately that would require the avarice and corruption of government to actually be reigned in, as opposed to simply paying it lip service (Stop the gravy train? Completely unacceptable!) 16 trillion… and counting.
Your analogy is faulty. A more accurate analogy would be you live in Maryland but pay Viginia tax rates. Of course, that isn’t legal….