Tuesday, July 31, 2012

Public audits of private individuals?

The left-leaning media is apparently still under orders to hammer Romney on the non-issue of his tax returns. It's two weeks removed from a flurry of hit-pieces full of naked speculation by people like Joan Walsh, but the hits just keep on coming. Witness this piece by someone named Grace Wyler at Business Insider. Entitled Romney Admits He's Been Audited By The IRS, the piece is completely devoid of any meaningful commentary, any actual analysis. It cites an ABC interview from Sunday in which Romney notes in passing that he's been audited "from time to time...as happens I think to other citizens as well."

Note first that this is no admission on the part of Romney. It's a mere statement of fact: he's been audited. So have lots of other people, particularly those making large sums of money like Romney. The IRS, in fact, targets high-income earners for audits (more bang for the buck) and has done so for a very long time. Moreover, many of these audits are not the long, drawn out affairs we might imagine them to be; instead, they are handled by correspondence between the IRS and an individual's accounts, often revolving around specific issues that require further clarification or documentation.

In short, being audited is just not that unusual for people like Romney. It's not a sign of wrongdoing, at all. To think that it is is to be tragically clueless. Not knowing Ms. Wyler in the least, I'd like to avoid labeling her as such, but her big conclusion in the piece--after the disingenuous headline--makes it difficult:
Although the remarks have been largely lost amid news from Romney's overseas trip, they raise even more questions about the Republican presidential candidate's murky financial records. How many times has Romney been audited by the IRS? In what years? And what did the audits find?
Wow. What a tool. "Murky" records? Please. And "what did the audits find?" Well, whatever they found, the issues were clearly resolved to the IRS' satisfaction. There are no large penalties being paid off by Romney, no lawsuits with the IRS, no subpoenas for records from the same. In short, nothing. No evidence to indicate a problem, past or present. Just the word "audit."

Maybe we should cut Ms. Wyler some slack, though. After all, she may not have the knowledge base to understand all of this (of course, that begs the question: why are her blatherings being published?). Certainly, someone with more knowledge of tax codes and tax laws wouldn't be saying these things. Let's turn to Michael Graetz, a professor of tax law and a former deputy assistant Treasury secretary for tax policy. In a piece at the New York Times, Mr. Graetz picks a nit, the issue of gift taxes:
Moreover, we have no clue whether Mr. Romney paid any gift tax on transfers, now valued at $100 million, to a trust he set up in 1995 for the benefit of his five sons. Until this year, the federal gift tax had a lifetime exemption of $1 million, and it taxed gifts in excess of that amount at rates between 29 and 44 percent. A gift of $100 million to one’s children could, therefore, require paying a tax of as much as $29 million to $44 million.
Bam! There it is! A smoking gun, if there ever was one. Except...Mr. Graetz admits he has no clue on this, that what he is saying is based on, well, nothing (take note, Ms. Wyler, this is how to use the word "admit"). For all we know, this issue has already been raised by the IRS and handled to its satisfaction. Graetz says that gift tax returns are "rarely" audited, but that's because--as he should well know--they rarely raise red flags since they are usually cut and dried issues that the IRS has pre-determined standards for.

Nonetheless, Graetz--with zero actual evidence to support him--calls for the release of Romney's gift tax returns:
To settle these questions, Mr. Romney should release his gift tax returns, or other documents showing how he valued his transfers to his family’s trust and to his I.R.A., and at least three additional years of income tax returns.  
No one should begrudge Mr. Romney or his family the wealth they have earned. But if he has not paid the taxes that apply to transfers of such wealth, this should concern us all. After all, who do you think pays for the shortfall?
It's an unbelievably ballsy request on Graetz's part: release documents to settle questions that have been raised in a NYT op-ed, that are based on nothing but naked speculation, that the IRS has either already addressed or ignored (because no red flags were raised).

So there we have it: an uniformed, clueless piece imagines that a past audit proves something significant and a piece by an "expert" jumps on a non-issue to create an air of questionability, with regard to Romney's past tax returns. In both cases, the solution is the same: private documents need to be made public so "evidence" can be found.

Mr. Graetz's manner of stating this is even more troubling, however. Apparently, he want documents released so people in the media--like himself--can determine if Romney has done something not only wrong but also illegal on his tax returns. That's just stupid. There is already an entity tasked with that job: the IRS. Assuming Graetz got his way and assuming he found evidence to back up his claim--a big assumption--what then? Does his judgment on this carry any weight? Would the IRS accept it and act on it? No, of course not. The man worked in government and is a professor of tax law. He must know this. Mustn't he?

Cheers, all.

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