Double Donation Deduction Dodge

September 22nd, 2012

A follow-up to Swiss Mitt, The Real Romney’s… Taxes and the rest of our “Mitt’s taxes” series, inspired by Romney tax rate 14.1 in 2011 (Philip Rucker et. al. Washington Post 9/22/12 page A1).

 

Dear Mr. Rucker:

 

In order to the substance of your article to more accurately represent,

Your headline should have read “10.55 percent.”

 

According to the income and deductions which the return showed,

That’s what Mr. Romney actually owed.

 

Depending on how the effects of the deduction and AMT combine,

Others have estimated a real effective rate as low as nine.

 

That paltry 9%, it must be understood

Is after Mitt told advisors to make his tax rate as high as they could.

 

How much lower could they have gotten that rate, in contrast,

If they’d tried to minimize it instead, as in years past.

 

But what makes that 14.1% rate even more suspicious

(Or more accurately, outright fictitious):

 

As your article mentions but then seems to discount,

Mitt can get a refund for the overpaid amount.

 

Mitt can refile and get that refund any time he chooses.

Why would he not do that, especially if he loses?

 

But there’s one more explanation even more delicious

Which makes Mitt’s deception even more pernicious.

 

Mitt could also refile to add new income sources

(And maybe more deductions for Ann’s and his horses).

 

Hidden income would also explain quite well

Why Mitt’s income from over $21 million to less than $14 fell.

 

Why would he hide that income? Maybe it’s foreign accounts or investments in China

In a plant that was outsourced fromNorth Carolina.

 

This hidden income wouldn’t be subject to penalties or additional tax,

And would allow Mitt to avoid the resulting political attacks.

 

And if that unreported income is tax-preferred,

That could reduce Mitt’s tax rate to something even more absurd.

 

So Mitt’s move could be two tax dodges in one.

Isn’t being a mega-millionaire fun?

***

The flip side of Mitt’s donation dodge is that he could be doing it not only to make his tax rate less politically damaging (10.55% looks bad and 9% even worse, especially after Mitt said it would be over 13%). And as I pointed out way back in The Real Romney’s… Taxes and others have pointed out since the 2011 return’s release, Mitt can at any point file to get that money back (in fact, he could already have done so).

But there’s one more delicious possibilty: the overpayment might also be masking other income that Mitt does not want to publicize (e.g., foreign bank accounts, or a Chinese auto company). So instead of filing for a refund, Mitt might just end up fling to report more income. His income tax rate would then still be the lower 10.55% (or 9%) rate, unless his previously unreported income were (uncharacteristical) more highly taxed. Indeed, if that previously unreported income is from even more tax-favored sources, it could make his effective tax rate even lower. Logically, if the unreported income, if it exists, would have increased Mitt’s tax rate, then he would have reported it earlier in order to make his tax return look more politically appealing. This suggests that if Mitt’s unclaimed deductions are a spaceholder (and penalty-avoider) for additional income, then that income will at least allow him to retain his same low rate, or possibly even reduce it.

 

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One Response to “Double Donation Deduction Dodge”

  1. Newsericks » Blog Archive » Point-One Percenter Popcorn, Perrier, and Parsimony (or: Mitt’s Money Management Morals Make Mere Mortal Mores Immaterial) Says:

    […] I pay a much higher tax rate than Mitt […]

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