Monday, April 16, 2012

Ahah! So, This Is How You Do It!

When the Romney campaign disclosed in December that the couple’s five sons had a $100 million trust fund, you had to suspect that in setting up the fund, the Romneys used a tax strategy that allows some very rich people to avoid paying gift taxes. But it was impossible to know if this was the case without seeing their tax returns going back years.
So when Mitt Romney released the family’s 2010 tax return last week, folks started looking. And here it is, the hint on pages 132 and 134 of the return. It showed that the value of property placed that year into another family trust, the Ann D. Romney Blind Trust, was, for tax purposes, zero. The Ann Romney trust is not the same trust as the one that holds the Romney sons’ $100 million, but I wondered if the Romneys used the same approach in prior years when it came to valuing property placed into the sons’ trust.
Reuters emailed the Romney campaign spokeswoman to ask how much the Romneys paid in gift taxes on assets put into the sons’ trust over the last 17 years. The spokeswoman, citing Brad Malt, the Romney family tax lawyer, answered: none.
The idea that someone could pay zero gift taxes on contributions to a $100 million trust fund may surprise people who have heard arguments that the wealthy are overburdened by gift and estate taxes. But the Romneys’ gift-tax avoidance strategy is perfectly legal.
Kevin Drum at Mother Jones flagged this interview with Johnston on CNN in January as well where he was discussing the same column at Reuters -- Mitt Romney's Kids Pay an Even Lower Tax Rate Than He Does:
As we all know, much of Mitt Romney's wealth is derived from "carried interest," a share of the profits from investments that Bain Capital made while he was CEO. This income is taxed at the same 15 percent rate as ordinary capital gains, which is why Romney's tax rate is so low.
But it turns out there's another interesting tidbit about carried interest that I've never heard of before: It's a great way of passing along a huge inheritance to your kids without paying any taxes. David Cay Johnston explains:
Johnston: The Romneys gave $100 million to their sons and paid not one penny of gift tax. They were able to take assets they have that are producing enormous income and, under the law, give that money to their children and not pay any taxes on it.
Sambolin: Is that something you specifically found in what has been released to you?
Johnston: Yes. I have suspected this and written about it in my column that this is what happened, and last night, Brad Malt, the attorney for the Romneys, confirmed to Reuters that we were correct. They have not paid a penny of gift tax. That's because Congress allows a very tiny group of people—the Romneys by their income are in the top 1 percent of the top 1 percent—to not count as having any value the real source of their income, something called carried interest, if they give it to their children.
As he noted, "Welcome to the wonderful world of estate planning for the super wealthy." The segment above from Up With Chris Hayes showed Romney out on the campaign trail saying President Obama was trying to "divide America" by asking that the rich like himself pay their fair share in taxes. As their panel of David Cay Johnston, Betsey Stevenson, Tom Perriello and Heather McGhee noted later in the program, that division does not have a fifty/fifty split, since the ones Romney is carrying water for are only the super rich in America and the upper 1 percent.


jadedj said...

Surprise, surprise.

Engineer of Knowledge said...

Hello Microdot,
Good information but comes as no surprise.

dog gone said...

Nice detail work! Well done!

I noted that Ann Romney's version of being a hard working stay at home mom was to have four housekeepers - one for each house - no dusting or making the beds for Ann! And to be a stay at home mom in a home without kids, who were apparently off at boarding school.

How hard is it to be a mom on just the rare occasions when they were home? Are we to believe they didn't have some kind of nanny or au pair over the summers, or they weren't off at some kind of expensive camps (probably religion based?)...yeah, the only labor Ann Romney put into those kids was when she gave birth, and for that she was probably knocked out with drugs.

Oh! The strain, the pain, the hard work of being Ann Romney stay at home mom........NOT.

Mitt Romney's dad was a pretty neat guy; too bad he never got further in his attempts to run for President.

Too bad Mitt Romney did.

Engineer of Knowledge said...

Hello Dog Gone,
What a good comment. Keep up the good work.