All of Mitt Romney’s Fancy Schmancy Tax Planning Strategies Should Serve as a Reminder That We Really, Really Need Tax Reform

Yesterday, we told you about Jesse Drucker's stellar report on Mitt Romney's "I Dig It" trust and how it allows his family to pass along wealth to the younger generations with relatively little taxes being paid. It was the latest of many reports and scoops on Willard's finances and really, we shouldn't be surprised. He could be the wealthiest president EVAH, so naturally there would be people digging into his life of wearing monocles, top hats, swimming in gold doubloons, etc. and, in general, how rich people get and stay rich.  

The media has beaten to death the Romney-is-one-rich-dude story much to the chagrin of lots of people (including our resident CPA exam maven) and the lesson (?) from Drucker's is no different than the others. These estate tax planning strategies, while common knowledge amongst a certain segment of tax professionals, is virtually unknown to the public at large because the public at large don't need elaborate estate tax planning strategies like deferred grantor trusts. The Romneys probably didn't know they needed them either until some wealth preservation expert (who bills out at a handsome rate) informed them how to pass it along to their kids while navigating the code and saving a BUNDLE in taxes. That's what estate planning is. Drucker's report wasn't critical of the strategy; it merely just stated the facts of how the Romneys were using it and the nuts and bolts of how IDGTs work. WithumSmith + Brown's Hal Terr confirmed this by stating how commonplace they are and how, if they were eliminated, it would make estate planning more difficult. Jesus, the tax code is a mess. 

Thankfully, Josh Barro's response to Drucker's article points this out and he sums things up:

We shouldn't expect rich people to pass on perfectly legal opportunities to avoid taxes, any more than we would expect middle-class people to do so. 

That's really what the focus of all this Romney taxes hubbub should be about. Nobody should care that dude is super rich. They shouldn't even care that these slick tricks allow him to stay super rich. He's just following the rules like you and me. Sure, the rules are a lot more complicated when you're wealthy and it seems unfair to people who don't use or understand them. But it's the mind-job of a tax code and the years of legislative dealing that has enabled these types of strategies to exist in the first place that are to blame. If Romney wasn't running for president, we wouldn't even know they exist. Whether people realize it or not, the real story is that the tax code is in serious need of reform and Romney could be the man to do it. If only he embraced the opportunity.   

Romney Is Avoiding Estate Taxes. So What? [Bloomberg via Double Taxation]

Latest Accounting Jobs--Apply Now:

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Comments are closed.

Related articles

Where Does Janet Yellen Want to Be Taxed?

Presuming that Janet Yellen, our current secretary of the Treasury, lives in California, her marginal tax rate might be as high as 13.3%. That’s a little scary for those of us living here in Maryland. Good thing she knows how to handle finances. For that kind of tax rate she might easily be persuaded to […]