Sen. Carl Levin (D-MI) says Mitt Romney will have to make his pre-2010 tax returns available. That may sound like a predictable demand from a partisan Democrat. But it’s more than that.
Levin may well know more about tax avoidance strategies than anybody in Congress. In his capacity as the Democrats’ top investigator he’s has made extensive inquiries into the techniques businesses and individuals use, including overseas havens, to hide their money from the IRS. And what Romney’s revealed so far troubles him.“I saw in the paper this morning that the spokesperson for the Romney campaign said that it was just an ‘ordinary’ bank account in Switzerland,” Levin told reporters at a Christian Science Monitor breakfast round table, referring to the revelation that the Romney family held a Swiss bank account in his wife’s name from 2003 until 2010.
“Folks, we’ve done a lot of research. We went after UBS in my subcommittee. We have seen abuses by American wealthy folks trying to hide from Uncle Sam, putting their money in Swiss bank accounts and bank accounts in other tax havens,” Levin said. “There was a period when the IRS said ‘OK, come on in, pay your taxes on your Swiss accounts, and you won’t have to pay any penalty.’ Thirty-three thousand people, I believe, showed up in the last couple years to pay their taxes…. And the spokesperson for the Romney campaign says it was just an ordinary bank account in Switzerland that Mrs. Romney had. There is no such thing as an ordinary Swiss bank account. Now, there may be a few exceptions where you’ve got Americans who are living in Switzerland who have bank accounts, but as far as I know, Mrs. Romney was not living in Switzerland.”
Levin also raised the issue of the carried interest loophole — a strategy Romney has exploited to avoid millions a year in taxation. Whether in the context of the fight over the payroll tax cut, or later in this session of Congress, Levin and other prominent Democrats plan to make closing the carried interest loophole a major legislative priority.
“My brother [House Dems’ top tax guy Sandy Levin] is working on the language and I expect that somebody on the Finance Committee in the Senate or one of the conferees in the Senate will do something in terms of carried interest, and if they don’t I will,” Levin said. “I’ll introduce my brother’s bill when he finalizes it.”
Nearly all tax experts agree that hedge and private equity fund managers should have to count their “carried interest” — their take in profits of the firms they manage — as wage income. But a loophole in the tax code allows them to treat it as long-term capital gains, and thus pay a significantly lower tax rate on it. This loophole is the key reason Romney’s tax rate is so low. And Levin thinks the confluence of public outrage at inequity in the tax code, combined with Romney’s prominence, will create a groundswell in support for closing this and other loopholes that overwhelmingly benefit the wealthiest Americans.
“This will be, in the middle of this year … there’s a sea change going on, and that is now the Republicans who ideologically have stood against any revenue are not going to be able to withstand the onslaught of the public outcry against the use of tax loopholes in the code, the tax havens that have been used to avoid paying taxes, the fact that corporations are given deductions for stock options in amounts far larger than they show on their books,” Levin said. “People’s eyes glaze over when you talk that way — until now. And now, because of Romney’s situation, there’s going to be a real focus.”