Fifteeen or twenty years ago when my financial position was really improving, I spent a weekend with a friend of mine that had enjoyed a major business success and made a great deal of money over a few short years. He explained to me that a few months earlier he had hired a prestigious bank and law firm, and they had designed an offshore tax haven for him that essentially allowed him to live in the United States and pay almost no taxes. He extolled the virtues of moving your money to Switzerland and The Carribean, and offered to make introductions to his advisors so I could do the same thing.
“But isn’t that illegal?”, I asked.
“No, absolutely not. You just need to make sure you hire the right people to set it up. There are ways to do it so it is completely legal, you just have to be rich enough to afford the advice and the set up fees” he explained.
I declined, explaining that I would rather pay my reasonable share of taxes and keep my money in safe, traditional investments that are easily accessible and allowed me to sleep at night. And that has always been my approach.
Don’t get me wrong…..I certainly don’t enjoy paying taxes, and I am not some tax-paying Saint. I admit I do take advantage of many legal tax deductions – some of which are really only available to wealthier tax payers. But in the end my wife and I are relatively conservative about pursuing any kind of controversial deductions, and pay a significant sum to Uncle Sam and several states and cities. And with many reservations about how our taxes are spent, I do it happily, as I think as an American I get a pretty good deal. While most of us are feeling pretty negative about our country right now, once you leave the US you begin to understand how well run the country really is. Sure it can be better, and we need to keep working at it, but overall we live in a country that operates pretty smoothly, with a solid infrastructure (albeit one that right now needs some work to keep current) that would be the envy of most of the world. And to maintain and improve this infrastructure we all need to pay our fair share. We can (and should) all argue about what that fair share is and how it is spent, but the bottom line is that individuals and corporations need to fairly participate and pay their taxes.
I thought then, as I do now, that my friend was unpatriotic. It seemed ridiculous to me to go to such lengths to avoid paying reasonable taxes. “Keep most of your money where you live”, seems like a good rule to live by, and I would have respected my friend much more if he had actually chosen to move to Switzerland or Grand Cayman instead of parking his money offshore and enjoying life in America.
Which of course brings me to Mitt Romney. Whether or not it is legal, it disturbs me that someone that aspires to be President of this country has gone to great lengths to shield his income from taxes and park his money outside of the USA. “I pay all the taxes that are legally required, not a dollar more”, explains Romney, and even that explanation is a bit troubling, as if someone that doesn’t scour every available option to keep from overpaying Uncle Sam is some kind of rube. I would prefer a Presidential candidate that says “I happily pay taxes to this great country”. It seems a better message to all of us, and a much more patriotic message to expouse to the country.
As detailed in this month’s Vanity Fair, Romney has utilized his well-publicized financial acumen to construct a very complicated personal financial structure that fully utilizes off-shore tax havens, as well as the various domestic tax advantages afforded only to the investment elite. Romney has numerous investments in The Cayman Islands, and since entering politics he has gone to great lengths to transfer his money to his wife and other less transparent investments. I couldn’t help but marvel at the time and money Romney must have devoted to keep from paying taxes in the country that had helped make him weathy.
The most interesting thing about Romney’s financial position is his tax free IRA account, which has an astounding balance of $102 million dollars! Since the most you can put into an IRA account is a few thousand dollars a year (depending on your age and other accounts) an account with this balance would indicate one of two things:
- Mitt Romney is a 500 year old Vampire who is a skilled investor and has always been serious about retiring, and has been putting money in his account for centuries.
- Or Mitt Romney has found a great way to further shield his investments in a tax free account.
Well of course we all know the answer is 2. While I am not sure whether or not Romney is a Vampire (he does have classic Vampire hair), IRA accounts have only been around for decades, not centuries.
But here is the other big issue. All of this points to the need for tax reform, and especially the need to reform a system that only benefits a tiny amount of the population that works on Wall Street and legally manipulates the system. And it is hard for me to believe that President Romney would dismantle a structure that has made him such a wealthy man. It would be like expecting President Peyton Manning to shut down the NFL.
Or here’s another idea….. perhaps Romney should run for President of The Cayman Islands so he can be closer to his money.