The latest journalist to press Mitt Romney on his tax returns is the ultra-resourceful Josh Tyrangiel of Businessweek. Here’s how he cleverly posed the question in a recent interview:
If you’re an investor and you’re looking at a company, and that company says that its great strength is wise management and fiscal know-how, wouldn’t you want to see the previous, say, five years’ worth of its financials?
Alas, no dice. Romney’s response:
I’m not a business. We have a process in this country, which was established by law, which provides for the transparency which candidates are required to meet. I have met with that requirement with full financial disclosure of all my investments, but in addition have provided and will provide a full two years of tax returns. This happens to be exactly the same as with John McCain when he ran for office four years ago. And the Obama team had no difficulty with that circumstance. The difference between then and now is that President Obama has a failed economic record and is trying to find any issue he can to deflect from the failure of his record. Thanks, guys. Goodbye.
The conventional wisdom on why Romney won’t release more than two years of tax returns was shaped by George Will, who now-famously posited: “The cost of not releasing the returns are clear. Therefore, he must have calculated that there are higher costs in releasing them.” Since then, the speculation has produced three basic theories. The first, which Tyrangiel’s Businessweek colleague Josh Green laid out most elegantly, is that Romney paid little or no taxes in 2009, which voters might find a bit infuriating for a guy worth several hundred million dollars. As Green writes:
When the stock market collapsed in 2008, the wealthiest investors fared worse than everyone else. (See, for instance, this Merrill Lynch study.) The “ultra-rich”—those with fortunes of more than $30 million—fared worst of all, losing on average about 25 percent of their net worth. …
As a member of the ultra-rich, Romney probably wasn’t spared major losses. And it’s possible he suffered a large enough capital loss that, carried forward and coupled with his various offshore tax havens, he wound up paying no U.S. federal taxes at all in 2009.
Green goes on to point out that 2009 is really the only Romney tax-year almost no one knows anything about, since he released 20 years’ worth of returns to John McCain’s vetters—and McCain aides have assured us they were kosher—and has released at least part of his returns for 2010 and 2011. (Depending on what Romney knew and told McCain about 2008, that year could also be opaque, but this doesn’t change the basic point.) That 2009 would be the sticking point affirms the idea of a financial-crisis-related story.
The second theory is based on Romney's enormous contributions to the Mormon Church over the years. While he is personally proud of his financial support for the church, the theory concedes, he is deeply uncomfortable discussing his religion in public. As John Heilemann, the father of the theory, puts it:
[F]or a candidate who has taken extravagant pains to avoid discussion of his supremely prominent role in contemporary Mormonism, the idea of a wave of news stories detailing the tens of millions of dollars that he has given to the Church of Jesus Christ of Latter-day Saints—surely making him among its most generous funders in the modern era—must be a kind of nightmare.
The final theory is a bit more sinister, holding that there’s something in Romney’s 2009 returns that isn’t just politically inconvenient but which approaches illegality. One possibility is that Romney tried to beat a late 2009 IRS amnesty deadline for Americans with money stashed in tax havens. According to this Los Angeles Times piece from October of that year, interest in the amnesty program skyrocketed after the Swiss bank UBS settled with the U.S. government, which had accused it of participating in a multi-billion-dollar tax-avoidance scheme. The settlement threatened to expose a lot of rich tax-evaders who had previously assumed the Swiss would keep their yaps shut. As Matt Yglesias explained it a few weeks back:
Romney might well have thought in 2007 and 2008 that there was nothing to fear about a non-disclosed offshore account he'd set up years earlier precisely because it wasn't disclosed. But then came the settlement and the rush of non-disclosers to apply for the amnesty. Failing to apply for the amnesty and then getting charged by the IRS would have been both financially and politically disastrous. So amnesty it was.
(Say this for the amnesty theory: It would provide ironclad evidence that Romney wasn't planning to run for president in 2012!)
Relatedly, the former Bush I Treasury official Michael Graetz has dismissed the idea of a Swiss tax shelter (“He is far too smart for that”) but speculated that Romney may have questionably valued the assets in his IRA accounts and in a trust for his children in order to avoid millions in tax payments. Or that he used his Cayman Islands vehicle to elude certain IRA taxes.
None of these theories would shock me if true, but they all strike me as problematic. Yes, paying zero taxes when your net worth is upward of $250 million isn’t something to trumpet. But, if paired with the primary explanation—Romney lost tens of millions of dollars during the financial crisis—it hardly seems scandalous. The Mormon explanation has a ring of characterological truth—it just sounds like Romney! The problem is that we already know Romney gives eye-popping sums to his church based on his 2010 tax returns. Even if it turned out that, say, he wrote a $10 million check to build a new temple in Belmont, it doesn’t strike me as qualitatively new information.
If I had to put money on this—on which, I can assure my friends at the IRS, I would most certainly pay taxes—the tax-amnesty/legally-dubious-tax-avoidance theory sounds most plausible. What else would make it worthwhile to stonewall? But even this theory has flaws. For example, if Romney applied for amnesty in 2009, that means the account existed for some time before then, and the McCain campaign should have flagged it. (On the other hand, Romney could have told them it was perfectly legitimate, only to get squeamish when UBS settled. Or not disclosed it at all, as Yglesias suggests.) Likewise, wouldn’t the McCain vetters have picked up the aggressive asset-valuations and Cayman Island hijinks that Graetz describes?
Which is why I wouldn’t rule out a fourth theory: garden-variety rich-guy haughtiness. It wouldn’t shock me if Romney believes that, having earned his money legitimately, and having paid all the taxes he was legally required to pay, questions about his tax returns are simply beneath him. Nor would it shock me if his campaign advisers, while clearly aware of the political damage his refusal is inflicting, have learned that you simply can’t budge the boss on matters of personal pride and dignity. And so they’ve given up.
Like the other Romney tax-return theorists, I obviously don’t have a smoking gun. But I’ve spent a decent amount of time chatting with Romney officials these last few months. And on several occasions I got the distinct impression that there were simply places a Romney aide—even very senior and trusted aides—can’t go with the candidate, at least beyond the most gentle prodding. One of those places is credit (the figurative kind, not financial). As several aides told me, Romney insists on being known as the co-writer of all his speeches. Now, that may reflect reality. But, you know, who cares? Why make it a red line? It suggests a certain prickliness. Another of those places is Ann. A campaign official I spoke with shuddered at the idea of offering tactical advice involving the candidate’s wife. General questions of money and wealth—before you even get to taxes—are yet another of these deeply-fraught subjects.
(An aside: I don’t think Mormonism actually falls into this category. While running for U.S. Senate in 1994, Romney was quite open in discussing his faith in an attempt to educate the public. But the campaign felt that this did them no good—the only thing voters took away was that Romney was a Mormon, a religion they were otherwise ignorant of. So Romney and his advisers made a strategic decision to discuss it as little as possible going forward.)
Now, I’m not suggesting that haughtiness is the entire story. Romney is a fundamentally rational man. If his aides make a case that he can’t win unless he does X, he will likely do X even if it causes him some personal angst or embarrassment. But I can certainly imagine that the dynamic I’m describing has skewed the internal conversation in unhelpful ways. For example, it may well be that Romney’s returns show some aggressive but politically non-lethal tax-minimizing, which campaign aides might prefer to reveal in order to put the issue behind them. (McCain’s aides may have felt the same way.) But because of their squeamishness about broaching this stuff with Romney, the discussion never gets very far, and so the release doesn’t happen. Given what I know about Romney and his campaign, that seems entirely plausible (though I have no direct knowledge of it). And, if I’m right, it must be absolutely maddening for the people who have to take bullets for him day in and day out.
Update: A number of readers have missed the key point of my item--what makes it a "unified" theory--which probably means I didn't explain it well enough. The point isn't that Romney's taxes are immaculate and he just won't release them on principle. The point is that there's probably some pretty unsightly stuff in there, but not so bad that it would destroy his presidential hopes, and his aides just can't persuade him to come clean.
I imagine it being a kind of 55-45 decision: The pure political calculus is that he should release the returns to put an end to the hemorrhaging. But there are going to be details in the returns that cause him a lot of short-term, non-fatal pain and embarrassment. With a candidate who was more approachable on these matters, his aides could make their case frankly and get to the right outcome. (As Mike Tomasky has suggested, we'd probably see enough to qualify as "disclosure" by some definition, but not close to every page.) With Romney, I imagine the conversation is so awkward and uninviting that it just never goes very far. Maybe the aides broach it a few more times as the political pain escalates. But I doubt if they ever get to make the full, unvarnished case. And so the returns never get released.
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