Harry Reid: Mitt Is Not The Face Of Mormonism

[_Kishkumen]

Of course not. Because the tax is deferred (not avoided), it is misleading to include the current investment earnings in one's income against which you compute the overall rate of tax that is paid. A tax law professor would know that doing so would skew the results.

With a Roth IRA, the government gets its tax dollars before the owner gets to use the rest. In exchange for paying the tax now and the owner agreeing to hold off until retirement before spending the Roth IRA balance, the investment earnings between having paid the tax and withdrawing the Roth IRA funds are not taxed.

I assure you that he understands IRAs. Seriously. He has even written articles in which he talks intelligently about them as well as proposing new ways of constructing them and for different purposes. My guess is that there is some motivation here for saying what he said--some context--that is not coming out in the quote.

[_Kishkumen]

Let's look at what this article said more carefully:

Romney's claimed rate is misleading in another way. Boston College tax law professor Brian Galle noted that Romney's IRA has grown since 1999 at a rate of roughly $9 million to $10 million per year. Yet he pays no taxes on those gains. Adding $10 million to his 2011 income of $13.8 million, for instance, nearly doubles it, meaning his tax rate is roughly half of what his real gain was.

"Mitt Romney was paid an immense amount for services rendered and is not putting it in his income. ...To say he has a 14 percent rate doesn't capture the economic reality of what's happening," Galle said. "It's more like Romney has a salary of $10 million and he's paying 14 percent on $1 million and the rest just isn't included."

OK. First, which parts of this are quoting Galle verbatim?

Here is what we know for sure:

"Mitt Romney was paid an immense amount for services rendered and is not putting it in his income. ...To say he has a 14 percent rate doesn't capture the economic reality of what's happening," Galle said. "It's more like Romney has a salary of $10 million and he's paying 14 percent on $1 million and the rest just isn't included."

Note the ellipsis.

Note the fact that the first sentence of the material I first quoted ("Romney's claimed rate is misleading in another way.") is not Galle.

Note that the next part ("Boston College tax law professor Brian Galle noted that Romney's IRA has grown since 1999 at a rate of roughly $9 million to $10 million per year. Yet he pays no taxes on those gains. Adding $10 million to his 2011 income of $13.8 million, for instance, nearly doubles it, meaning his tax rate is roughly half of what his real gain was.") is clearly a paraphrase.

Now, you are telling me that, based on this, you guys are willing to call him an "idiot"?

I hope not, because, if so, I would have to say that you are the ones exercising questionable judgment and reading skills. My guess is that what he was talking about was the growth of Romney's wealth both realized and unrealized. The journalist simply drew the conclusions he wanted from what Galle said, and editorialized a little to boot.

I am not sure what it is you have a beef with in what he was quoted verbatim (mostly, except for the elided portion) as saying, but I am all ears.

[_sock puppet]

Please point me to where I called Galle an idiot.

[_Kishkumen]

Please point me to where I called Galle an idiot.

Good God, man. I am not talking to everyone on the thread. For the love of Pete.

[_sock puppet]

Mitt Romney and his wife, Ann, more than doubled their investment income from foreign sources in 2011 versus 2010, including some sources in tax havens around the world, according to tax returns released by the Republican presidential nominee's campaign.

The Romneys reported $3.5 million in foreign income out of $13.7 million in 2011 adjusted gross income, the benchmark figure used to figure out taxes owed. That compares with $1.5 million in foreign income on 2010 AGI exceeding $21.6 million, according to the Romneys' tax returns for 2010 and 2011.

That means the Romneys last year derived just over a quarter of their income from non-U.S. investments, such as funds and entities in Bermuda, Luxembourg, the Netherlands, Ireland, and the Cayman and British Virgin Islands, the returns showed. In 2010, the Romneys' foreign income was just 7% of their AGI, which was much higher that year.

While the Romneys' tax strategies are legal, their large share of foreign-sourced income highlights the difference between their tax returns and those of average Americans. ... Overall, the Romneys received income from 50 foreign investment corporations last year, nearly three times the number in 2010, the returns show.

In January 1999, a trust set up by Mitt Romney for his children and grandchildren reaped a 1,000 percent return on the sale of shares in Internet advertising firm DoubleClick Inc. If Romney had given the cash directly, he could have owed a gift tax at a rate as high as 55%. He avoided gift and estate taxes by using a type of generation-skipping trust known to tax planners by the nickname: “I Dig It.”

The sale of DoubleClick shares received before the company went public, detailed in previously unreported securities filings reviewed by Bloomberg News, sheds new light on Romney’s estate planning -- the art of leaving assets for heirs while avoiding taxes. The Republican presidential candidate used a trust considered one of the most effective techniques for the wealthy to bypass estate and gift taxes. The Obama administration proposed cracking down on the tax benefits in February.

While Romney’s tax avoidance is both legal and common among high-net-worth individuals, it has become increasingly awkward for his candidacy since the disclosure of his remarks at a May fundraiser. He said that the nearly one-half of Americans who pay no income taxes are “dependent upon government” and “believe that they are victims.”

“People like Mitt Romney make a lot of money, but they pay very little income tax,” said Victor Fleischer, a tax law professor at the University of Colorado who has written extensively about private equity and taxes. “Then by dodging the estate and gift tax, they are able to build dynastic wealth. These DoubleClick documents really show that tax planning in action.” The Obama administration estimates that closing the loophole Romney used would bring the federal government almost $1 billion in the coming decade. ...

Multimillionaires use such trusts to avoid those taxes in three ways. First, they can assign a low value to assets they donate to the trust. Second, when the trust sells assets at a profit, the donors can pay the relatively low capital gains taxes on behalf of the trust. By doing so, they leave more money in the trust, untouched by the much higher gift tax. Third, by paying those taxes, they can reduce the pile of wealth eventually subject to an estate tax when they die.

[_Cicero]

I am sorry, is Cicero your sock?

Nope

[_Jason Bourne]

On the fly right now, but quickly for Kish:

I already said my calling Galle an idiot was tool string and retracted it. At least I didn't say he was talking out his ass and acting like a dick unlike you did to me and Cicero.

Next I do not look down or discard academics. Much of what I read,attend training on and learn comes from tax professors. I have even though of going that route myself a few times in my career.

Last of all I am sorry you are so offended by the comments about Galle's remarks. I did not know you know him personally. And sure, he clould have been quoted out of context. Since you know him perhaps you could send him a note and ask him.

Last of all, in defense of my own profession, sure there are sleazy Tax CPAs and Attorneys who twist the tax law to its limits and border on and even can be criminal. I noted on another thread here that an attorney/promoter of the Son of Boss scheme about sucked me and one of my partners into selling this to a client. We were damn close. But our judgement over came our greed to get a big fee and our cleints greed to save a lot of tax. And technically it looked damn good. But substantatively it was just a fares and too good to be true. We passed. I am happy we did. That attorney can no longer practice, his firm was blown apart, he may even be in jail.

As you know, our politicians have come up with an incredibly complex tax law. I still run into things that just boggle my mind as to how complex they are and in some cases just ludicrous. However some of the reason the law is complex is to catch cheaters and abusers of the law. The rules relating to offshore investing and foreign owned companies and trusts is one example. And because those rules are so onerous and complex they often impose burdensome results on honest taxpayers that my guess was never intended.

That said,I see nothing wrong with with tax practioners using the law honestly and within its boundaries to save cleints tax dollars. But more times than not I am telling a client that may not like the fact that the law requires them to report some sort income and pay a heavy Texas on that income and that they simply must pay the tax. I could give examples but would rather not.

[Guest]

On the fly right now, but quickly for Kish:

I already said my calling Galle an idiot was tool string and retracted it. At least I didn't say he was talking out his ass and acting like a dick unlike you did to me and Cicero.

OK. Well, clearly my words were taken more seriously then I had intended them. I apologize. I use expressions like "talking out of your ass" and "behaving like a dick" when I am razzing friends in a disagreement. Since I consider both you are Cicero to be more like friends than simple casual acquaintances, I thought I was relatively safe smacking you in the arm like that.

Am I on board with everything you guys are saying? No.

My basic point is that hypothetical policy discussions are different than "what is the law" discussions. Galle loves to write about the former, while it seems to me, and correct me if I am wrong, that you are reacting negatively to the what you understood to be ignorance about the latter. My sense is that so many of us know the crude basics of how an IRA is taxed that it would be inconceivable that Galle would not know and thus make a dumb statement.

So, to test my theory, I showed the little Huffpo piece to my wife, who got it right away. She said, and I paraphrase, that he is talking about the rather esoteric idea that IRA gains *should* be taxed in the present, rather than at a point in time when inflation has reduced the value of the tax collected. So, this is not about Galle not knowing the basics of IRAs; it is about Galle exploring hypothetical policy options. I get the sense that his position on this is a lot more Left-leaning than most people here would be comfortable with, since the practitioner's goal is to see that the client generally pays less, wherever possible and legal, whereas his goal as an academic is to think through different policy options and their impact.

Unfortunately, the Huffpo piece, as I thought, has taken Galle's more complex idea out of context and presented it as though Romney is cheating or doing something illegal right now. In reality, Galle would be using Romney as an example of how the wealthy can game the system legally to build massive fortunes and avoid taxation as much as possible. My guess is that he thinks some of that is unfair, but I have not confirmed that with him.

Next I do not look down or discard academics. Much of what I read,attend training on and learn comes from tax professors. I have even though of going that route myself a few times in my career.

No offense, Jason, and I think that you believe you respect academics, but your remarks about the "real world" are simply offensive to academics. We happen to inhabit the same real world you inhabit. And damn straight you should not discard academics, because some practitioners do read the academic articles and plan their shelters, etc. accordingly. In other words, this is "real world" impact of scholarship. Furthermore, academics write about what is happening in Congress and the Senate in a depth of detail that many practitioners otherwise would not take the time to research themselves. This is of "real world" importance.

Sorry, but I am fed the hell up with this "real world" BS. Everyone imagines academics as some cushy gig where you simply sit on your ass all day and do nothing of significance. That BS has to stop, and, if you ever got my hackles up in this conversation, it was right there. You turned to calling Galle an "idiot" almost immediately, and I believe that is indicative of the same bias. There is a reason why our political discourse has been corrupted almost irretrievably, and this idea that professors are irrelevant is very close to the core of the problem. That is highly ideological resentment there, and it is not pretty. It is also detrimental to the body politic.

My apologies, I guess, that journalism is not the ideal forum for conveying complex ideas. But, you should not need to be told that.

Last of all, in defense of my own profession, sure there are sleazy Tax CPAs and Attorneys who twist the tax law to its limits and border on and even can be criminal. I noted on another thread here that an attorney/promoter of the Son of Boss scheme about sucked me and one of my partners into selling this to a client. We were damn close. But our judgement over came our greed to get a big fee and our cleints greed to save a lot of tax. And technically it looked damn good. But substantatively it was just a fares and too good to be true. We passed. I am happy we did. That attorney can no longer practice, his firm was blown apart, he may even be in jail.

As you know, our politicians have come up with an incredibly complex tax law. I still run into things that just boggle my mind as to how complex they are and in some cases just ludicrous. However some of the reason the law is complex is to catch cheaters and abusers of the law. The rules relating to offshore investing and foreign owned companies and trusts is one example. And because those rules are so onerous and complex they often impose burdensome results on honest taxpayers that my guess was never intended.

That said,I see nothing wrong with with tax practioners using the law honestly and within its boundaries to save cleints tax dollars. But more times than not I am telling a client that may not like the fact that the law requires them to report some sort income and pay a heavy Texas on that income and that they simply must pay the tax. I could give examples but would rather not.

I don't see anything wrong with it either. The problem is that the tax code has been utterly effed up by the Congress, and often to skew things in favor of particular interests. As I sit here, I am almost caused to long for a flat tax with a threshhold below which the poor would either get a break or not pay. That might, however, put you and my wife out of a job. As things stand, our system is oppressive to some, rather overly kind to others, and generally unfair.

I know that you are a very good and ethical man. I am not impugning your profession as a whole. I am sorry for being sloppy and making it sound like that. I agree that some attorneys and CPAs skirt the law. Furthermore, in the current conversation about Romney, I believe that his tax behavior is sketchy. In my view, he fits that LDS type of the guy who is very upright in his dealings with other human beings, but a little dodgy in his dealings with Uncle Sam, local governments, etc.

I know these guys very well. The crap about Romney's residences and where he happened to be actually living at the time he ran for office and so forth: CLASSIC EXAMPLE. Other examples I have seen are the guys who leave their car registered in a place where a relative or ex-spouse lives just to avoid paying the vehicle tax or paying the higher insurance. There are a thousand little ways to save a buck, or get what you want, and when the entity on the other end is the "guvment", people find it easy to rationalize it. LDS people I have known are particularly good at rationalizing it, as far as I can tell. It is not a coincidence that the Mormon West has the highest concentration of tax protesters in the country. It is hatred of the government as though it were some foreign occupying power, which, in LDS culture, is probably not felt to be too far from the truth. Long live the Kingdom, eh?

So, yeah, I think Romney is both a good guy, and I think that he is, in some ways, a cheat. And the reason I can believe what appears to be a contradiction on its face is that I have seen him scores of times in LDS wards I have attended. I grew up with guys like him.

[_Jason Bourne]

Kish

Your post above is fine with me. I did not realize the more "crude" comments were more in a friendly connotation. Now that I understand that we are good. I agree, as I did before, I I should not have called Galle an idiot. I also agree that I should avoid the "real world" comments when referring to academics as well. Really at times I envy you all. I love to teach and do research. In fact tax research and writing about it is the best part of my job. Next is teaching those new to the profession.

And yes for tax policy to be formed academics play a big role. Typically practioners just don't have time to write and research on theory and policy and impact of tax law. I wish I did. But on top of servicing many clients and trying to generate business I run a tax department of 60 other professionals. So that takes up about 2500 hours of my time per year.

Were good and for may part I am sorry that I over reacted to Galle's comments. I am sure I could learn from him and your wife.

[_Kishkumen]

I apologize for being so impassioned. As a younger academic, I often feel embattled these days. There are a lot of Republicans out there that want to see my profession downgraded for their own purposes. I don't take kindly to it, and I do believe that the almost reflexive disdain that people generally have for "ivory tower" academics who do not work in the "real world" is part of the reason it is so easy for right wing radicals to assault the Academy.

You are not personally at fault for that. It did, however, get my dander up. I guess I did not realize how much so until you brought it more to my attention how I was behaving.