Romney’s Ryan Timing: A Taxing Matter

Ann Romney, presumably acting as a surrogate for Mitt, is now announcing that no additional tax returns will be released to the public before the election.

As friends and foes have dissected the Ryan choice, one question has received little serious attention: Why did Mitt Romney destroy any excitement associated with the convention by announcing his choice of Paul Ryan early? What motivated this decision?

Here’s one explanation: The timing of Ryan’s pick was an effort to deflect increased attention on Romney’s tax payments, or lack thereof, before he becomes the official Republican nominee.

Several weeks ago, I wrote in “My $10,000 Bet” that Romney would not release any additional information on his tax returns before he becomes the official nominee. As a result, no matter what the tax returns include, Republicans will be forced to support Romney. If necessary, they will defend the indefensible.

Over the past few weeks, the stakes related to Romney’s lack of disclosure have heightened tremendously. Senate Majority Leader Harry Reid asserted that Romney has effectively paid no taxes over the past ten years; and leading private equity magnates have been unable to explain with any certainty how Romney could lawfully build his “magical IRA”, to a value of $21 million to $102 million. Finally, Romney has flatly stated that he has paid taxes, with at least a 13% tax rate each year, over the past ten years, while providing no proof of any kind.

With regard to tax disclosures, Romney has recognized that the best defense is a good offense.

First, rather than prove Reid was wrong, Romney responded by questioning the name of Reid’s source at Bain Capital, with the aggressive phrase “It’s time for Harry to put up or shut up.” Let’s be clear about one thing: Romney’s response to Reid was meaningless. It was a question designed to deflect the central issue. The real question is whether Romney did indeed pay taxes.

Unfortunately, the press and pundits fell victim to Romney’s punching defense, rather than maintaining their focus on the real issue. The New York Times said the “cantankerous” Reid “hurl[ed] a taunting, unsubstantiated accusation” , and Mark Halperin wrote in Time magazine that these were “charges so reckless, they recalled Joe McCarthy and the birthers.” How does Halperin know if Reid is right or wrong? The only people that know the truth have done everything possible to avoid addressing it.

At this point, Romney’s double offensive: Build a focus on other issues by naming Ryan, and declare his own version of his tax record could put Democrats and advocates of disclosure on the defensive. He has skillfully maneuvered them into asking for disclosure because they don’t trust him. In effect, he is forcing his opponents to risk calling him a liar.

Moreover, if Romney has in fact paid taxes at a 13% or higher rate, and does release his earlier returns, the means he used to build his “magical IRA” and overall wealth however questionable, will be drowned out by the chorus of Republicans repeatedly saying “He told the truth… His tax rate was above 13%…Harry Reid never had a valid source.”

Nonetheless, the Republican party and the American people do have a right to know whether the potential Republican party nominee is, in fact, a liar, or has engaged in questionable financial dealings. Romney’s unverified statements about his taxes, his seemingly unexplainable accumulation of wealth in his IRA, the continuing suspicion that he is hiding something, and the placement of large portions of his wealth in notorious tax havens outside the jurisdiction of the United States (hardly a patriotic act) all create questions about the candidate’s ethics that transcend the minimum disclosure required by law.

How can Americans possibly elect a President who has not dispelled the lingering suspicion that he may be a liar, may be hiding some highly questionable financial activities or may even be a crook?

Here are four lessons from U.S. history and Romney’s personal history that show why Romney must release his tax returns.

First, it’s widely known that Mitt’s father, George Romney, released 12 years of tax returns prior to his Presidential bid. What is not widely repeated is his rationale. To write a biography of George Romney (Mitt’s Dad) published in 1967, George Harris, a senior editor for Look magazine, took a five month leave of absence, When the biography, Romney’s Way: A Man and an Idea, was released, Harris wrote an article on his interactions with George Romney for Look magazine, dated December 12, 1967.

In the article, Harris writes:

“He balked when I badgered him for a copy of his latest Form 1040, the Federal Individual Income Tax Return. Release of the document, while it might serve a political purpose, would not prove very much, he argued. One year could be a fluke, perhaps done for show, and what mattered in personal finance was how a man conducted himself over the long haul.

Stumped by this argument, I was not prepared for the move that it eventually led him to make: He ordered up all the Form 1040’s that he and Mrs. Romney had filed over the past twelve years–including those profitable ones when he saved American Motors Corporation from bankruptcy and became a millionaire on the company’s stock options.”

In the published biography, Harris also writes that in examining the tax returns:

“Auditors notice two unusual facts in these returns. First, the Romney’s have never made much use of tax loopholes, such as depletion allowances, that are taken for granted by most people who reach their bracket. Second, over the 12-year period, they have donated an average of 19 percent of each year’s adjusted gross income to their church.”

In the August 9th issue of Business Week, Romney asserts that he will be a successful president, because he is a successful executive who learned about leadership from his father. He says, in part,

“Well, I had the privilege of growing up in a home with a Dad that was a leader…So I learned something about leadership from a man who was an extraordinary leader.”

Unfortunately, it’s clear that Mitt missed one central leadership lesson from his Dad: The need to build the trust of his constituents. As Mitt’s Dad noted, tax returns over a short period can be manipulated. By failing to provide verification of any kind, Mitt is failing to create trust among the electorate that he will ultimately need to govern, if he is elected.

Dad also believed that a man’s past financial history, and what it showed about his character, were important indicators of how he would perform as President. Here, the American people have no idea how Mitt stacks up. However, Mitt’s extensive use of tax shelters and off-shore tax havens, in direct contrast to the way his father, George Romney, conducted his affairs, is not a positive sign.

Second, Romney has repeatedly expressed his admiration for Teddy Roosevelt, saying in one interview, “I love Teddy Roosevelt. I read everything I can get my hands on about Teddy Roosevelt.” Romney must have glossed over the many histories that discuss TR’s belief that leadership without a commitment to moral purpose was meaningless and, in fact, dangerous. In one well known statement in 1901 Theodore Roosevelt declared:

“If courage and strength and intellect are unaccompanied by the moral purpose, the moral sense, they become merely forms of expression for unscrupulous force and unscrupulous cunning. If the strong man has not in him the lift toward lofty things his strength makes him only a curse to himself and to his neighbor. All this is true in private life, and it is no less true in public life.”

There is no doubt that Theodore Roosevelt would assert that merely adhering to the requirements of the law, while failing to serve as a moral example, is well below the essential activities for a positive public leader. Indeed, a good test of whether someone has acted as a moral example is this: Does the nation benefit if every man, woman and child follows the leader’s example. Hence, we must assume that as President Romney would, echoing Theodore Roosevelt’s most famous phrase, be “delighted!” if every American placed their funds in the Cayman Islands and Switzerland.

Leadership, as recognized by Theodore Roosevelt, is not satisfying the minimum required by law. It is going above and beyond the requirements to provide a worthy example to others and to benefit the community. George Romney recognized the need for such moral vision in our leaders, Mitt Romney does not.

Third, it is doubtful, but not impossible, that Mitt Romney’s tax returns contain a campaign-ending, untenable secret. We all remember that President Nixon famously declared “I am not a crook.” Until I viewed the clip below, I had forgotten that as part of this statement Nixon also said, “I welcome this kind of examination, because people have got to know whether or not their President is a crook.” Yes Mitt, Americans “have got to know” that the Republican Presidential nominee, and possible next President, has complied with the laws of the land.

Finally, former president Reagan, perhaps the most admired icon of today’s Republicans, may have made the most compelling argument for disclosure. In matters of importance, he proclaimed “trust but verify.”

Mitt, it’s time for you to put up or shut up.

• Become A Funded Futures Trader