Mitt's not at fault for loopholes in tax code

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January 30, 2012

Anonymous Daily Star The Daily Star Mon Jan 30, 2012, 02:25 AM EST

As the longtime frontrunner for the Republican presidential nomination, Mitt Romney has faced withering attacks from rivals seeking to upset him.

Some have been unfair, like Texas Gov. Rick Perry's charge that Romney practiced "vulture capitalism" during his time at Bain Capital. Former House Speaker Newt Gingrich described Romney's old firm as "rich people figuring out clever legal ways to loot a company."

Carcasses don't voluntarily sign contracts with vultures. These ailing companies sought Bain's help because of prior mismanagement, so it's unfair to blame Romney and his colleagues for the subsequent layoffs.

But the controversy over Mitt Romney's taxes last week shed light on a more-shameful practice, albeit one for which Romney isn't to blame. Regulatory filings from Bain Capital show that Romney's assets include a stake in BCIP Trust Associates III, a partnership registered in the tax-free Cayman Islands. According to ABC News, Bain has at least 138 such funds registered in the Caymans.

The BCIP fund is registered under an address in the Cayman capital, George Town, at the site of a building owned by the international law firm Walkers. Many corporations, such as Coca-Cola, Intel and Oracle, have addresses there for tax purposes.

Another Cayman law firm, Maples and Calder, owns a nearby five-story office building that houses, at least on paper, almost 19,000 companies. "Either this is the largest building in the world," said President Barack Obama in a 2009 speech, "or the largest tax scam in the world."

The debate over Romney's taxes is about fairness: his offshore tax-avoidance strategies are beyond the reach of most ordinary Americans. The tax return he released last week revealed that Romney also pays a much lower income tax rate (13.9 percent) than his less-wealthy rival Gingrich (roughly 32 percent) because most of Romney's income is from investments, not wages.

But as billionaire investor Warren Buffett said last week, Congress is ultimately to blame for the loopholes Romney uses.

"He's not going to pay more than the law requires, and I don't fault him for that in the least," Buffett said. "But I do fault a law that allows him and me earning enormous sums to pay overall federal taxes at a rate that's about half what the average person in my office pays."

Romney's campaign has noted that his tax-avoidance strategies are perfectly legal, which is true. A 2008 Government Accounting Office report concluded that Maple and Calder hasn't broken the law.

"It's not really getting away with something," said offshore investment lawyer Bart Mallon last week. "It's just working within the tax laws as they're currently written."