Mitt’s money managing could be Bain of election
Eugene Robinson email@example.com July 6, 2012 1:40PM
Updated: August 9, 2012 6:21AM
You can conduct byzantine transactions through opaque investment accounts and private corporations in offshore tax havens such as Bermuda and the Cayman Islands. Or you can credibly run for president at a time of great economic distress.
I don’t think you can do both.
Let me be clear that I have nothing against wealth. In fact, I have nothing against great wealth, which is how I would classify Mitt Romney’s estimated $250 million fortune. We can argue about the social utility of private equity firms such as Bain Capital, but Romney isn’t responsible for distorting the system so that financiers are grossly overpaid. He just took advantage of the situation.
Increasingly, however, I have to wonder whether the achievement Romney touts as his biggest asset in running for president — his business success — might be seen by many voters as a liability.
The question isn’t whether people can relate to a candidate who has tons of money. It’s whether they will connect with a man who didn’t make his money the old-fashioned way — by building a better widget — but by sending capital hither and yon via clicks of a computer mouse to take advantage of arcane opportunities most people never even know about.
Most Americans, for example, do not have an individual retirement account valued at between $20 million and $101 million, as Romney stated last year in a financial disclosure report.
When Romney was running Bain and building up his IRA, the maximum annual contribution permitted by the tax code was $2,000. So how did his IRA get so huge? He won’t say. It’s possible he rolled over some money that was originally in the kind of 401(k) retirement plan offered by many employers. But annual 401(k) contributions were then capped at $30,000, including an employer match — in Romney’s world, chump change.
Analysts surmise that Romney may have placed his interests in various Bain investment partnerships in the IRA, taking advantage of Internal Revenue Service rules that allow these interests to be undervalued for IRA purposes. In some cases, they can even be valued at zero, since partnership interests represent future income, not present income, and ...
OK, I know I’m losing you here — but you get the point. IRAs were created as a way for middle-class Americans to save some tax-deferred money for their senior years. It isn’t clear what Romney is using his gargantuan IRA for, but it’s not what Congress intended.
Then, there’s the question of a Bermuda-based company that Romney and his wife, Ann, own, Sankaty High Yield Asset Investors Ltd. According to The Associated Press, the company has been part of Romney’s portfolio for nearly 15 years, but was not reported in any state or federal disclosure reports. It surfaced in Romney’s 2010 tax returns, which he reluctantly released earlier this year.
According to those returns, Sankaty is little more than an empty shell today. But AP reports that the company “served as Romney’s partnership stake” in a larger group of Sankaty-named funds that Bain once used to manage more than $100 million in investments. Channeling private-equity and hedge-fund investments through offshore firms in places such as Bermuda and the Caymans can allow investors to avoid a tax on what is known as “unrelated business income.”
Romney’s campaign says he pays every penny he is required to pay in taxes — although his income is taxed at about 15 percent, a lower rate than most middle-class Americans pay. But one of the sources of anger and anxiety in this country — on the left and right — is the sense there are two sets of rules, one for the rich and powerful and one for everyone else. In making and managing his money, Romney appears to take every possible inch the law arguably allows.
That’s good finance, but I doubt it’s good politics.
Eugene Robinson is a columnist with the Washington Post Writers Group.