Passing Through . . . .

Since today is the due date for filing US Individual Income Tax returns in the United States, I have been thinking about GOP Presidential nominee Mitt Romney.  Here is a person who aspires to be the leader of the country.  Part of his oath is to uphold the laws of the land including the Constitution which includes our income tax.   Mr. Romney has a lower effective tax rate than most Americans.  Now, how does he accomplish this tax magic.  First, he probably has the best tax advisors who have devised the following techniques:  Use of offshore bank accounts: these are legal but subject to disclosure in his tax return.  But why is disclosure required – because offshore bank accounts in the Cayman Islands, Switzerland, etc are the favorite methods of hiding and under-reporting income.  One wonders when Mitt’s returns were last audited.

Another technique is the use of the so-called “Carried Interest Rule”  This is a bit of tax fiction where a promoter (e.g. Bain Capital) sets up partnerships for investors.  Bain earns a management fee for managing the investors’ funds.  Management fee income is generally (and for most individuals) ordinary income taxed at higher (approximately 35% federal plus state and local taxes) rates than capital gains which are taxed at 15% plus state and local taxes.  By conducting his businesses in partnerships rather than through a corporation, Mitt saves over half the income tax others would pay on the same income.

Of course Mr. Romney has other non-tax benefits from his strategies.  For example, as a holder of offshore bank accounts, he can rub shoulders with drug dealers, arms traffickers and other less than savory citizens.  He has all that extra after-tax cash he can use to buy election to public office.  And his wife might be, in addition to having title as First Lady, she can be the First Lady Tax Avoider.

I will not be supporting Mr. Romney in November.