Back in January, Mitt Romney was still in the primary race against several members of the Republican Party who were on direct orders from God to become President. It is of course hard work winning against people sent by the creator of the universe to take the job you want, but Romney made it happen. During this time period, it was reported that some of Romney’s considerable wealth from Bain Capital resided in curious locales such as the Cayman Islands and Switzerland. As I am quite versed in global business practices of this sort, the use of offshore accounting was not shocking. However, I found it significant that a man running for president of the United States did not feel it necessary to repatriate his money prior to a campaign that would put him under scrutiny. I wrote an article for The Atlantic on this subject about how this shows the weakness of our nation-state institutions when even presidential candidates don’t even bother keeping up appearances, attempting to be the figurehead for a country while simultaneously acting as an itinerant financial nomad.
In the months since, the Romneys and their campaign apparatchiks have been playing a somewhat skillfull game of cat and mouse, claiming that they have been plenty transparent enough, assuring us that they paid, like, at least 13% or whatever – not that you can check. Snarky articles appear in the media, journalists pepper Romney with questions, but meanwhile the campaign seems resolute in their game plan to remain as opaque as possible.
Let me save everybody some time and spoil how this story comes out. The Romneys are never going to release their tax returns because it will lay bare the structure of their finances, thereby publicizing the tips and tricks used by people in their situation and creating a narrative that will make the “99% versus the 1%” story seem like an episode of Rush Limbaugh by comparison.
Here’s the letter from Mitt Romney, explaining everything, that you will never be receiving.
My dear fellow Americans,
I thought I would take a moment away from eating diner food in the flyover states and making triumphant gestures into the air with Paul Ryan to explain the situation surrounding my taxes once and for all.
As you probably know, I am a really, really wealthy guy, which poses some campaign messaging problems compared to the barely-millionaires who normally run for office. Let’s put it this way, Dick Cheney was rich when he became Vice President, but I make him look like the hostess at your local Applebee’s, limping to work in a rusted out Hyundai with one temporary donut tire. You see, Cheney was a bureaucrat most of his life, and only got the Big Money Show at Halliburton for a few years between being Secretary of Defense and running George Bush. I did it the right way around, getting stupid rich before entering politics. This way, unlike Clinton and Obama, I won’t be forced to give talks at $200,000 to every oil despot and Indonesian financier on God’s green earth in order to set my kids up permanently. Ann and I are going to be eyebrows-deep in dressage ponies no matter what happens in November.
How much money do I really have? Depending on the value of my assets the week you ask, let’s just call it a number between $250 million and a billion. Can you really tell the difference between the two numbers in terms of what it means to my place in the social hierarchy? No, you cannot. I don’t have a slightly puffy 401(k) that came from making some billable hours and bonuses at some ambulance chasing law firm – I have real money. Bain Capital executed a brand of finance known as the “roll up” strategy, in which we take existing sectors, inject a bunch of money in, buy up or drive out thousands of locally-owned small businesses, kill the category, cut salaries, jack up prices, sell the sucker off, and profit like rock stars. Perhaps you’ve heard of our exploits – Staples, Domino’s, Guitar Center. We rode that final wave of suburbanization and big box retail like Big Kahuna surfers on the north shore of Hawaii. Americans moving out to the Burbs stopped caring about personal relationships with long standing family run enterprises in walkable downtowns, and starting responding primarily to big retail spaces, big brands, and big parking lots near the McMansion they bought with some dogshit subprime negative amortization loan. Our skill was in concentrating capital into businesses that gave Americans what they wanted and little else. You can’t blame us for being excellent at what we did, and I’m not apologizing even if you do.
I was sole shareholder of Bain Capital, which is what led to my my aforementioned Serious Wealth. Ann and I aren’t your fat and happy Aunt Bev and Uncle Frank, who ran Tuscaloosa’s biggest used car dealership for thirty years and now use the seven million they got when they sold out to provide them a monthly income with which they go on cruises featuring shuffleboard and all-you-can-eat buffets. We have equity in the Big Game, the whole system, and quite simply – we have enough money that deciding where to put it all is kind of a problem. Stop snickering and learn something – I’m not kidding, you yokels. When you have north of a quarter billion in assets, are you really going to give it to the asshole 27 year old barely-former frat brothers at Ameriprise Financial to “manage?” Are you going to be one of Goldman Sachs’ Muppets, buying the wrong side of their “shitty deal” mortgage-backed securities, or serviced by mouth-breathers so careless they actually manage to destroy all of the equity in your company at once? You don’t trust the judgment of people whose real expertise is so dubious that they are forced to run ads during every sports event on Earth until the sun goes out just to keep the suckers coming in the front door. You may notice that Bain Capital never ended up going the way of Bear Stearns, Lehman Brothers, Wachovia, et al. I’m actually GOOD at what I do, so I’ll structure the deals myself thank you very much. That’s how I got to this level of wealth in the first place.
Now, naturally, when you have money, earn interest, sell equity and make cash on side doing speaking and whatever, there’s the little issue of taxation. This may never occur to you, because your relationship to whichever government stands over you is very straightforward – you earn money, they know how much (because you and your employer tell them eventually) and you give them a certain cut of the money, sooner or later. That’s not how it works when you have a business, or have enough assets that you yourself are a series of corporate structures more than “a household.” I don’t make money and immediately prostrate myself on the steps of every single national revenue service where we’ve done business. There’s a thing called “recognizing income.” When you’re doing billions of dollars of business, it’s not like the accounting for your weird neighbor’s cottage industry selling Beanie Babies on EBay. It’s all a question of the flows of money, the entities involved, how your fiscal year is set up, in which country what took place and so on. You can manage it, and you must, unless you want to pay the maximum allowed instead of, well, something more reasonable.
Do you understand why I’m not excited about turning this over to the American political press? Can you imagine Wolf Blitzer trying to chew his way through this in his stultifying afternoon headline show, much less explaining it to the voters in some swing state?
And yes, there’s the issue of the Caymans, Switzerland, and Bermuda. Many people in position set at least some of their assets up in such places for a double benefit. First, it gives you an extra place to store or “recognize” different flows of money, which of course can be quite a bit when you consider the sums with which I typically play. Second, a lot of these countries do not quite report everything that goes down when national revenue services ask – unlike, for example, the pizza joint you work for, which will be dead meat if it gets caught lying to the IRS or revenue Canada or whoever. Some places, like Bermuda, tend not to report anything, making it a little seedy looking, but really quite useful at times.
Are you thinking of setting up your financial life this way? Don’t bother. You don’t have the money to qualify for this kind of structure, much less the skill to pull it off. This is how people like me manage to get our taxation down to around a third of what you pay. I’m sure it doesn’t seem “fair” to you, but, you see, given the laws currently in place, I’m afraid this is just how it works. It’s very sophisticated, and I hope you understand why Ann and I have not been relishing putting information of this complexity out there to be misinterpreted, as it surely will.
Now, thanks for listening, and make sure to buy a Romney-Ryan t-shirt before Obama gets his government hands on your Medicare.
With kind regards, hopefully your next POTUS,
Willard Mitt Romney
It’s not forthcoming, but it would be fun, right?