Former Massachusetts Gov. Mitt Romney (R) took the first step toward launching his presidential campaign yesterday, touting his business experience and record as governor in a clear attempt to position himself as a pro-business alternative to President Obama. He made no mention, however, of Bain Capital, the company he founded in 1984.
However, while Romney often cites closing corporate tax loopholes in Massachusetts to balance the state’s budget as among his biggest successes, he simultaneously owes some of his personal wealth to the fact that the company he helped start took advantage of offshore tax havens to shield investors from having to pay American taxes. (Romney was the wealthiest of all presidential candidates in 2008, boasting a personal fortune of nearly $250 million and spending $45 million of his own money during the 2008 primary.) As the Los Angeles Times reported in 2007:
Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands. But aides to the Republican presidential hopeful and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Romney’s former company, Bain Capital, and thus boosted profits for Romney and his partners.
By routing investments through shell companies set up in Bermuda or the Caymans, companies like Bain Capital allow their investors to avoid the 35 percent corporate tax rate they would have to pay in the U.S., leaving more revenues for executive compensation. Romney might have closed corporate tax loopholes in Massachusetts, but he predictably does not feel the same way about the tax laws that allowed his company to operate freely in these offshore tax havens. He recently advocated for a one-time repatriation holiday to allow corporations hiding income offshore to bring it home to America at dramatically lower tax rates, and he supports substantially lowering the corporate tax rate.
Offshore tax havens are legal and often result in financial windfalls for businesses, CEOs, and investors. But they’re harmful for American taxpayers. The U.S. Public Interest Research Group estimates that the U.S. government loses $100 billion a year in tax revenue due to these tax havens. Because American businesses and taxpayers have to make up the lost revenue, the costs trickle down, costing individual taxpayers an estimated $500 annually.