Thursday, August 23, 2012

The Romney Tax Dump: First Thoughts

My first thought when I saw the story about the Romney tax data drop was "this is going to be huge." Within moments I had clicked through to Daniel Primack at Forbes saying pha, move right along folks, this is a non-event. Primack makes some interesting micropoints, but on close reading his piece begins to sound an awful lot like the special pleading of a guy who didn't run with this story when he came across (part of?) it a few months ago.

For a more temperate view, I moved on to the estimable Daniel Shaviro who, unfortunately, begs off from serious analysis, pleading deadlines. Shaviro does linger long enough, however, to offer one instance of what our weekend might be llke--"the debt-equity swap." Take it away,Dan:
Suppose I think GE stock would be a good investment, but I don't want to own it for tax purposes because the Caymans entity through which I am investing would owe withholding tax on any dividends that GE paid. So I arrange a swap with a bank that has the following terms. One year from today, it will pay me the interest that I would have owed it on a $100 million loan. It will pay me an amount equal to the dividends that I would have derived during the same year had I owned $100 million of GE stock. In addition, it will pay me the amount by which $100 million of GE stock appreciated during the year (or I will pay it a similarly determined amount if GE's stock price goes down).
For those of you who were staring out the window:
The bottom line is that, counter-party credit risk aside, this is economically equivalent to borrowing $100 million at the specified interest rate in order to hold $100 million of GE stock for a year.
So this is what high-end tax work is all about, or did you know? Anyway, first thought: the sheer cheesiness of it all. Recall that this is one of the richest men ever to run for the leadership of the free world. And note what we're fighting for here: not the question of "pay/no-pay," but only the question of when to pay, i.e.,at the very worst, the cost of the lost use of the money if you have to pay early --net, I should add--of the hefty bill that the preparer will present for having structured this baby.

Migawd, you are saying: is that all? All? Mr. Megabucks will go to the mattresses to protect a transparent fraud dodgy and questionable--perhaps disallowable--tax dodge for the few nickel of lost interest on early payment?

Answer: probably yes.  Romney seems to be part of that multitude--let's face it, their numbers are not small--who think that tax evasion is a blood sport, the kind of game in which to leave any nickels on the table is to mark you as a chump and a loser.  As I admit, he is not alone: hell, there are places in this great nation where, when you come back to the country club after serving your time for tax fraud, they give you a party with balloons.

The thing ig was not always thus, and in some quarters, may not be thus now.  There was a time when to be born to a life of privilege was  a privilege and accepted as such by those who enjoyed it.  If by chance you garnered the extra accolade of an invitation to public service, you took it with humility or awe; the possibility that you might leave a few pennies on the table for the roughnecks down at the IRS was just not seen as so big as a deal.   Clearly not a common attitude.  Clearly not Romney's attitude, not ever, not now.
Footnote on charity: reviewing some recent news clips I see that Romney is also saying, "hey, I give to charity" (details pending, I guess).  I actually feel conflicted on this one.  There is much to be aid for keeping charitable donations secret--Maimonides said that the only true charity was anonymous charity because it was the only kind bestowed without ulterior motive.   I suppose I might be willing to waive the Maimonides rule if it turned out that Rommney's charitable giving was all focused on, say, the Dressage Federation.  For the moment, we don't know.  Still, I don't see why he ought to have both ways.  Seems to me that if he really wants to honor him for his charitable spirit, we have to know a lot more about where and when.

No comments: