Former Massachusetts Gov. Mitt Romney remains atop polls of likely Republican voters as wary conservatives who dominate the primary electorate line up behind a candidate they believe has the best chance of defeating President Obama in the fall. But new revelations about one of the wealthiest men to ever run for president could come back to haunt Romney’s campaign during a bruising general election where the growing income gap will be a constant refrain in the media and by Occupy Wall Street protesters, who are sure to show up at every campaign rally.
One thing is certain, if Romney wins, he will probably be either the first or second richest man to ever hold the nation’s highest office .Forbes magazine recently listed its list of the 10 richest U.S. presidents, adjusting for inflation. Everyone on the list from the 18th and 19th centuries – George Washington, Thomas Jefferson, James Madison, Andrew Jackson and Zachary Taylor – had fortunes that were based on ownership of land and slaves in a country that had far less net worth than exists today.
Three of the 20th century members of the list – Teddy and Franklin Roosevelt and John F. Kennedy – relied on inherited wealth shared with numerous siblings and cousins. That leaves just two “self-made” millionaires: Herbert Hoover and Lyndon Baines Johnson. The former earned about $2.5 million a year from mining interests before the 1929 stock market crash. LBJ did well by buying a television station in Austin – that’s just one television station at the dawn of the TV era.
Romney? His latest financial disclosures put his personal wealth earned while at Bain at anywhere from $190 million to $250 million, sufficient to earn, even at the meager interest rate of 3 percent, about $6 million a year. But he likely earns far more than that, as his tax filings, which he has promised to release in April, will undoubtedly show.
And those tax filings will provide huge insights into holdings that will provide an endless stream of stories for enterprising journalists, Democratic campaign operatives and public interest groups angry about inequities in the U.S. wealth distribution and its tax code. The revelations, which are already beginning to leak out, could cast serious doubts on Romney’s ability to effectively govern the nation.
Here are the five most serious questions likely to be raised over the next few weeks and months about Romney’s financial holdings and dealings:
1. The tax filing. Romney has already said his effective tax rate will be about 15 percent – the same as people earning $50,000 a year or less. Wall Street hedge fund and private equity fund managers are already fuming about how this has shed light on the special loopholes they enjoy, especially the treatment of their annual income as capital gains (so-called carried interest).
2. The Cayman Island dodge. ABC News is reporting that the Republican frontrunner parked millions of dollars in this offshore tax haven. “His personal finances are a poster child of what's wrong with the American tax system," Jack Blum, a Washington lawyer who is an authority on tax enforcement and offshore banking, told ABC.
3. His overloaded IRA. Romney, like all Americans, can let income and capital gains mount up tax free inside Individual Retirement Accounts. But rich people have far more investment options than average blokes, who buy individual stocks or index funds, cross their fingers and pray. And there are no limits on what can be sheltered until later in life. Romney, the Wall Street Journal reported today, has a big chunk of his fortune, anywhere from $21 to $102 million, in his IRA. While he’ll eventually have to pay taxes on that money when it’s withdrawn, the strategy substantially limits his current tax liability.
4. The Mormon Church dodge. Like many Americans, Romney tithes to his church. But, as today’s New York Times reports, Romney’s donations in some cases likely took the form of stock in companies like DDi Corp. and American Pad and Paper. While Romney, the church and other Bain investors reaped millions from those investments, both companies eventually went bankrupt and laid off thousands of employees.
5. The Fannie and Freddie bailouts. The Boston Globe reports that Romney in late 2007 invested up to a half million dollars in a mutual fund that bought Fannie Mae and Freddie Mac debt notes, which would have been rescued by the federal bailout. The two entities are always at the top of Republican talking points in trying to shift blame for the financial crisis from major banks, hedge funds and private equity funds to the public sector. The fund also invested in major investment banks like JPMorgan Chase and Goldman Sachs, which benefited from the financial bailout that Tea Party activists love to hate.
American Bridge, a liberal opposition research group that is compiling data on Romney’s financial record, told the Globe that his investments when juxtaposed to his rhetoric on the campaign trail shows that Romney’s “hypocrisy knows no limts.”
It’s a line the public is likely to hear a lot more about in the weeks and months ahead, especially when it becomes clear that he has the nomination locked up, which could happen as early as Sunday.