But by buying shares in offshore blocker funds that then invest in Bain and other takeover artists, investors like Romney bilk the Treasury out of $100 million a year. Such funds attract tax-exempt investors – like college endowments or Romney’s IRA – that want to avoid paying the Unrelated Business Income Tax, a 35 percent penalty designed to prevent tax-exempt investors from having an unfair advantage over for-profit businesses in private-equity deals. Romney also padded his IRA by investing in “blocker funds” that Bain has set up in the Caymans. By buying rigged stock with his limited IRA dollars, Romney got to reap the bonanza tax-free. By assigning an artificially low value to the shares, Bain ensured that any returns would be wildly inflated – as much as 30 times the initial investment. To get around the limits, Romney appears to have directed his IRA to invest in a special class of Bain stock. “Congress never intended IRAs to be used to accumulate that kind of wealth,” says Wilkins. Romney has stockpiled as much as $87 million in his IRA – even though contributions to such retirement accounts are limited to just $30,000 a year. stock dividends.” Romney has more than $1.25 million invested in four funds that profit from equity swaps – including two managed by Goldman Sachs. According to a Senate investigation, the purpose of these complex instruments is “to dodge payment of U.S. Under this racket run by top Wall Street banks, American firms pay out their profits – tax-free – to investment funds based in the Caymans. Romney is profiting from one form of tax evasion in the Caymans: equity swaps. But even if Romney never cheated personally, the feeder funds he appears to have invested in cater to tax criminals, making it easier for him and his Bain partners to raise capital and rake in big management fees. Has Romney paid all his taxes on the shady funds? Only he and the IRS know for sure. Marriott wound up paying less than half the corporate tax rate – just 16.9 percent.ĭid George Santos Actually. In 2009, as a board member for Marriott, Romney also helped the hotel chain use the same tax tricks to shelter more than $200 million in Luxembourg. To evade taxes on the gains, Romney steered the profits through Bain subsidiaries in Luxembourg, Europe’s most notorious tax shelter, where the money would be exempt from foreign taxes. Romney himself reportedly ended up with $50 million – a cut larger than Bain’s initial investment. In 2000, when Romney was CEO of Bain, the firm hit the jackpot: A $40 million investment in the Italian yellow pages during the tech boom returned an astonishing $1 billion. “What is this corporation? What does it do? Why was it set up in a tax haven?” asks Wilkins. Yet he failed to report its existence on any financial disclosures prior to his 2010 tax return, even though it is under his control. Romney created his shell company, Sankaty High Yield Asset Investors, in 1997 and reportedly involved it in many of Bain’s biggest deals, including the takeover of Domino’s Pizza. taxes, even on profits from American deals. Wealthy Americans frequently launder investments through such offshore shell companies, passing themselves off as foreign investors – a scam that makes them exempt from paying U.S. Mitt Romney” – driving speculation that the candidate is worth far more than he has disclosed publicly. Romney has buried an unknown, and perhaps significant, chunk of his wealth in what SEC filings describe as “a Bermuda corporation wholly owned by W. Greed and Debt: The True Story of Mitt Romney and Bain Capital “He’s pushing the limits of tax law beyond what many think is reasonable.” Indeed, a look at Romney’s finances reveals just how skilled he is at hiding his wealth – and paying a fraction of his fair share in taxes.Įvery Awful Thing Trump Has Promised to Do in a Second Term “He aggressively exploits every loophole he can find,” says Victor Fleischer, a professor of tax law at the University of Colorado. But tax experts note that there are plenty of red flags, including an investigation by New York prosecutors into tax abuses at Bain Capital that began on Romney’s watch. “The bottom line,” says Rebecca Wilkins, senior counsel at Citizens for Tax Justice, “is that these are ways to reduce your taxes that are only available to rich people.”Īre Romney’s tax dodges legal? It’s impossible to say for sure, given how little he has disclosed. That’s what Mitt Romney has done, according to his 20 tax returns, a trove of secret Bain Capital documents unearthed by Gawker, and exposés by Bloomberg and Vanity Fair. How does a private-equity kingpin worth at least $250 million pay a lower tax rate – just 14 percent – than many teachers and firemen? By exploiting tax loopholes that favor the rich and hiding his money in the world’s most notorious havens for tax cheats.
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