Thursday, January 19, 2012

GOP candidates taking full advantage of tax havens, taxpayer-funded pensions

Despite representing what is supposedly the party of fiscal conservatives, two of the five Republican presidential candidates are receiving tens of thousands of dollars in taxpayer-funded pensions, and front-runner Mitt Romney has deposited millions of his personal dollars in the Cayman Islands to avoid taxes.

Newt Gingrich is one of over 350 former US lawmakers and congressional staff receiving a federal pension of over $100,000 a year. Rick Perry gets a Texas state pension of over $92,000 a year in addition to his governor's salary. This seems questionable for two candidates who repeatedly denounce excessive government spending.

Meanwhile, Romney has between $10 million and $25 million in accounts in the Cayman Islands, a notorious tax haven. Because of his Cayman accounts--and the fact that much of his Bain income was classified as capital gains rather than ordinary income--Romney has been paying a far lower percentage in taxes (about 15 percent of his earnings) than most Americans.

So it seems extremely unlikely that the next president, no matter who it is, will do anything to reform the tax code. Obama and the Democrats will use Romney's low tax payments as yet another argument for raising tax rates, despite the number of millionaires and billionaires (Obama, Pelosi, Kerry, etc) in the party leadership. That's because they know that they can continue to exploit loopholes in the tax code, and only those who are less politically connected will be hit by the tax hike. Assuming he gets the Republican nomination, I cannot imagine Romney--a Wall Street millionaire with numerous accounts in the Cayman Islands--to do anything about tax loopholes. The Republicans seem to think that they can have their cake and eat it too by cutting tax rates while keeping loopholes and congressional pensions in place. Is it a coincidence that the last three Republican administrations have run massive deficits nearly every year?


  1. I think the key question on pensions is what the agreement was when these lawmakers were "hired". If these were legal employment agreements then they are entitled to the pensions even if I hate them. The law should be changed IMHO, but it's not fair to jump on the guy after the fact.

  2. RE: Taxes in the Caymans. Romney has his portfolio of investments in a blind trust where he has no control of where the money goes and does not see the individual investments. About 5-10% of his portfolio is invested in funds from the Cayman Islands. His accountant has verified that he pays the same tax on these investments as he would if they were in the USA. This is only an appearance issue. He is doing nothing improper.