Is that so much worse than everything else we're learning about him? Probably not. It's almost certain that Romney has never climbed anywhere near moral high ground in his life in spite of the religious pretense.
And yes, this looks bad for Romney.
Aside from the meager and vague disclosures he has filed under federal and Massachusetts laws, and the two years of partial tax returns (one filed and another provisional) he has released, there is almost no data on precisely what his vast holdings consist of, or what vehicles he has used to escape taxes on his income. Gawker has obtained a massive cache of confidential financial documents that shed a great deal of light on those finances, and on the tax-dodging tricks available to the hyper-rich that he has used to keep his effective tax rate at roughly 13% over the last decade. ...Gawker
By the time they "went to press" yesterday afternoon, Gawker had asked the Romney campaign for a reaction but, at that point, got none.
By last night the New York Times editorial board had some comments.
Back in 2007, The New York Times published an editorial that explained what was wrong with the tax treatment of Bain-like pay. It cited the work of Victor Fleischer, a law professor at the University of Colorado, who had written a let-us-count-the-ways report on how private equity partners avoid taxes.
In a nutshell, they collect a management fee on their funds of 2 percent, which is supposed to be taxed as ordinary income. And they collect performance fees, usually 20 percent of any profits, which – thanks to a loophole that should have been closed long ago – are taxed as capital gains, at a mere 15 percent, about the lowest rate in the tax code.
It is no secret that Mr. Romney has availed himself of the super-low capital gains rate on his Bain performance-fees – an obscene privilege, but not illegal.
What the Gawker documents indicate is that the Bain/Romney tax avoidance went further than that.
In brief, it looks like four Bain funds in which the Romney family’s trusts are invested converted $1.05 billion in management fees — which should be taxed as ordinary income – into capital gains, which are taxed at the much lower rate. The tax savings: $220 million. ...NYT
The Wall Street Journal strains several tense muscles in an effort to find a workaround to Romney's tax dodge, tossing Romney's alleged deeds into the "in theory" basket.
The link to Mr. Romney is that as part of his retirement agreement from Bain he was entitled to a portion of management fees in all Bain funds formed prior to early 2009. That includes the funds in the Gawker documents. So, in theory, he could have participated in this tax strategy. His 2010 tax returns show he or his family received capital-gains income from some of the Bain general-partner entities that were involved in the apparent tax strategy. ...WSJ
If you follow their arguments to the very end, though, you find that "Gregg D. Polsky, a tax-law professor at the University of North Carolina, in a 2009 paper argued that the type of priority carried interest produced under this arrangement doesn’t qualify for the favorable treatment under the 1993 IRS ruling, and also may run afoul of a law Congress passed to block partnership income from being recast into something else to obtain tax benefits."
Mr. Polsky, in his paper, called the fee waiver conversions “extremely aggressive and subject to serious challenge by the IRS.” ...WSJ
John Cassidy, the New Yorker's political/economic reporter, was trudging around a golf course with Tiger Woods when he was called back to the office yesterday to read and assess Gawker's trove of documents. So far he finds that "As far as I can see, there are not bombshells to report."
But, "Despite the lack of a single earth-shattering scoop, the documents are interesting and well worth posting online..."
Here I disagree with those who say that they have little or no news value. There are several reasons why the managers of private-equity funds and hedge funds don’t make documents like these publicly available, and why they ask the investors who receive them to sign confidentiality agreements. They don’t want to give away their secrets to their competitors. They also don’t want the public to know in any detail how they make their money, and the (legal) lengths they go to in order to minimize the taxes paid by their partners and investors. Anything that makes the world of hedge funds and private equity a bit less opaque is to be welcomed. And then, of course, there is the Romney angle. ...Cassidy, New Yorker
Quite apart from the light they shed on how equity funds operate, they provide some useful information to voters about the kind of man Romney is. They show, says Cassidy, that Romney hasn't been exactly truthful when asked about his finances. They don't show why Romney is so damned reluctant to release more tax returns.
Another mystery that remains unsolved is how Romney accumulated between $20.7 million and $101.6 million in a tax-advantaged I.R.A. A story on the Web site of ABC News attempted to tie it the fact that some of the funds Romney invested in used blocker corporations to hold large sums of money, but I don’t get it. The issue remains this: given the modest contribution limits to retirement funds, Romney’s I.R.A. must contain some assets that have risen enormously in value since he obtained them. What are they? ...Cassidy, New Yorker
The other thing we don't find out and would like to know, Cassidy suggests, is who supplied these documents and to whom. A Democrat? The Obama campaign?
Whatever else these documents facilitate and whether they become the straw that breaks the back of Romney's camel, Cassidy makes it sound as though remain a useful addition to our gradual understanding of our not-so-upright financial community. We certainly get more indication that corporations are indeed people, some of whom are indeed felons and shouldn't be allowed the vote and should be vetted -- document by document -- before getting anywhere near high office.