Outsourcing vs Insourcing... Mitt Romney And Mike Kelly

A lot of fuss has been made this week-- the celebration of our country's independence from Britain-- over Mitt Romney's tendency to avoid American taxes by stashing and investing his money overseas in notorious off-shore tax havens. But the GOP has a bigger problem than a shady, selfish presidential nominee. And we'll come back to that in a minute (although if you watched the video above, you already know what I'm getting at). First the Vanity Fair trip around the world peering into Romney's hidden millions. It's the story of a sociopath, an Ayn Rand character come to life with a sense of unfettered entitlement, righteous self-absorption and what-are-you-gonna-do-about-it avarice. Romney has been a cheat all his life, always, as Vanity Fair explains, "willing to push into gray areas when it came to business," urging his employees to bend the law and use industrial espionage to get a leg up. And that's how he's always approached paying his own taxes... gray areas.

[A]s he tried to nail down the Republican nomination for president of the United States, Romney’s gray areas were again an issue when he repeatedly resisted calls to release more details of his net worth, his tax returns, and the large investments and assets held by him and his wife, Ann. Finally the other Republican candidates forced him to do so, but only highly selective disclosures were forthcoming.

Even so, these provided a lavish smorgasbord for Romney’s critics. Particularly jarring were the Romneys’ many offshore accounts. As Newt Gingrich put it during the primary season, “I don’t know of any American president who has had a Swiss bank account.” But Romney has, as well as other interests in such tax havens as Bermuda and the Cayman Islands.

To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an “excepted investment fund” that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates. While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in “jurisdictions where there is virtually no tax and virtually no compliance,” as one Miami-based offshore lawyer put it.

That’s not the only money Romney has in tax havens. Because of his retirement deal with Bain Capital, his finances are still deeply entangled with the private-equity firm that he founded and spun off from Bain and Co. in 1984. Though he left the firm in 1999, Romney has continued to receive large payments from it-- in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers. Again, the Romney campaign insists he saves no tax by using them, but there is no way to check this.

...The media soon noticed Romney’s familiarity with foreign tax havens. A $3 million Swiss bank account appeared in the 2010 returns, then winked out of existence in 2011 after the trustee closed it, as if to remind us of George Romney’s warning that one or two tax returns can provide a misleading picture. Ed Kleinbard, a professor of tax law at the University of Southern California, says the Swiss account “has political but not tax-policy resonance,” since it—like many other Romney investments—constituted a bet against the U.S. dollar, an odd thing for a presidential candidate to do. The Obama campaign provided a helpful world map pointing to the tax havens Bermuda, Luxembourg, and the Cayman Islands, where Romney and his family have assets, each with the tagline “Value: not disclosed in tax returns.”


Romney’s personal tax rate is a particular point of interest. In 2010 and 2011, Mitt and Ann paid $6.2 million in federal tax on $42.5 million in income, for an average tax rate just shy of 15 percent, substantially less than what most middle-income Americans pay. Romney manages this low rate because he takes his payments from Bain Capital as investment income, which is taxed at a maximum 15 percent, instead of the 35 percent he would pay on “ordinary” income, such as salaries and wages. Many tax experts argue that the form of remuneration he receives, known as carried interest, is really just a fee charged by investment managers, so it should instead be taxed at the 35 percent rate. Lee Sheppard, a contributing editor at the trade publication Tax Notes, whose often controversial articles are read widely by tax professionals, is nonplussed that the Obama campaign has been so listless on the issue of carried interest. “Romney is the poster boy, the best argument, for taxing this profit share as ordinary income,” says Sheppard.

In the face of such arguments, Romney’s defense is that he never broke the rules: if there is a problem, it is in the laws, not in his behavior. “I pay all the taxes that are legally required, not a dollar more,” he said. Even so. “When you are running for president, you might want to err on the side of overpaying your taxes, and not chase every tax gimmick that comes down the pike,” says Sheppard. “It kind of looks tacky.”

The assertion that he broke no laws is widely accepted. But it is worth asking if it is actually true. The answer, in fact, isn’t straightforward. Romney, like the superhero who whirls and backflips unscathed through a web of laser beams while everyone else gets zapped, is certainly a remarkable financial acrobat. But careful analysis of his financial and business affairs also reveals a man who, like some other Wall Street titans, seems comfortable striding into some fuzzy gray zones.

And if you want to look into more of those fuzzy gray zones, I urge you to read the whole Vanity Fair article. No sane person would trust this man to run the country... or anything else. It makes you contemplate the subtle differences between a low-grade hustler and a high-grade hustler and how one breed winds up in prison and the other... in corporate board meetings-- and running for president. But this post isn't meant to be yet another indictment of Mitt Romney. His disease is a Republican disease: selfishness and greed, a sociopath's tendency to step on everyone and everything to get ahead for himself. Let's take a look at a little known freshman congressman from northwest Pennsylvania, Mike Kelly. Now the 13th richest man in the House, he was a beneficiary of the Great Blue Dog Apocalypse of 2010, a multimillionaire many times over running as a teabagger against a confused, weak and conflicted conservative Democrat, Kathy Dahlkemper. She voted time and again against working families and Democratic principles, encouraged to do so by the DCCC who push Democrats in swing districts like PA-3 to vote like Republicans. The effect was to keep base Democratic voters home on election day. Of the 146,846 voters (51%) who elected Dahlkemper in 2008, only 88,924 (44%) bothered showing up for her in 2010-- while GOP enthusiasm was sky-high. 111,909 (56%) voters backed Kelly, not a bad falloff from the 139,757 who had been to the polls for longtime incumbent Phil English when he lost to Dahlkemper two years before.

Like Romney, Kelly was born into a wealthy automotive family. His father owned a successful Chevrolet-Cadillac dealership and when he took over the family business he expanded by buying up the franchises of South Korean automakers Kia and Hyundai. He's the Chairman of the Hyundai Eastern Region Dealer Council and Vice Chairman of the Hyundai National Dealer Council and he's vice chairman of the House Subcommittee on Asia and the Pacific, a position that has given him a platform to push unfair "free trade" deals, which result in the loss of American manufacturing jobs to cheap Asian markets-- but help make Kia and Hyundai dealers very wealthy. But his dad's car dealership and his deals with the Koreans aren't the only things that made Kelly so rich. He married an heir to the Phillips Petroleum fortune. Do you think the millions of dollars in natural gas and oil stocks his wife owns has influenced Kelly's approach to his job in Congress? The guy who didn't talk about his Kia and Hyundai dealerships when he was lobbying for the South Korea Free Trade Agreement, has been as dedicated to Big Oil's toxic agenda as any Texas or Oklahoma crooked congressman.

Some people really hate the Chevy Volt, though we suspect few people hate it as much as Chevrolet-Cadillac dealership owner, and freshman Republican Congressman Mike Kelly. After repeatedly going on record declaring that there is “no market” for the Chevy Volt, on the eve of December 30th, the oil-rich Kelly introduced legislation to repeal the $7,500 tax credit for electric vehicles.

Kelly, who inherited his father’s car dealership in 1995, and married the heiress of the Phillips-Conoco oil company, has introduced legislation repealing the $7,500 tax credit, declaring it wasteful spending. This, despite voting to keep much-more generous subsidies and tax credits for hugely profitable oil companies. Kelly’s reasoning? “We want companies to be profitable.” Opps, looks like he let a little too much truth slip out there!

Then again why would Kelly, who has over $6 million in oil-related assets, want to end these generous subsidies for companies that make him money? How this is not a clear conflict of interest, I do not know, but even Kelly’s own constituents already seem fed up with him, as this video from a July town hall session shows.



In the video above, Kelly talks about poverty and how factories have gone under, yet he seems to have no problem bashing the very people who make the cars he sells. Kelly also tries to deflect the question with a question about pensions and portfolios, before going off on a spiel regarding rich vs. poor, have vs. have-nots, and rather than talk about oil companies he starts talking about GE not paying taxes, and at no point does he answer the actual question.

For a guy who inherited a car dealership, and married an oil heiress, Rep. Mike Kelly certainly has a lot of whining to do about the tax code.

Happy Independence Day! And yes, of course that photo of Romney and Rove was doctored. Here's the original picture; the one with him and Congressman Kelly isn't available yet.