Quote of the Day: Romney Is Ruining Things For All the Other Rich Guys

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Today’s QOTD comes from Stephen Breitstone, co-head of the taxation and wealth preservation group at Meltzer, Lippe, Goldstein & Breitstone LLP, commenting on one of the tax avoidance schemes that Mitt Romney used in the $100 million trust he set up for his children and grandchildren:

It’s going to be harder to do tax planning in the future. He’s bringing attention to things that weren’t getting attention.

This comes from a Bloomberg story about Romney’s use of an “I Dig It” trust, which Breitstone says is so important to the wealthy that ending its tax benefits “would put an end to much of estate planning as we know it.” Here’s how it works:

The person setting up the trust, like Romney, contributes assets such as an interest in a fund or shares in a company. If he makes that contribution before those assets appreciate — particularly when they are privately held and difficult to value — he can claim the gift tax obligation is low or non-existent since the declared value is low or zero.

If the trust generates any income — such as by selling stock — the eventual tax bill is the responsibility of Romney, not the trust. By paying the capital gains tax, which was 20 percent in the late 1990s and is now 15 percent, he can avoid depleting the funds in the trust — in essence making an additional donation that’s free of gift taxes….Gains in the trust for Romney’s heirs remain free of gift taxes and potential estate taxes.

Very cool, no? First, Romney undervalues the assets he puts into the trust so he owes little or no gift tax. Then, later, when the assets appreciate, he pays only the capital gains tax, which is considerably lower than the gift tax. And to make it even better, he pays the capital gains tax out of his own pocket, so the trust owes nothing. It’s like making a second gift to his kids free and clear.

Bloomberg says Romney did this with some DoubleClick shares he got in 1997, back when he was CEO of Bain Capital, but that’s undoubtedly just the tip of the iceberg. The DoubleClick payday amounted to a piddling $674,000 out of a trust worth over $100 million. Sadly for our nation’s ultra-wealthy, though, the spotlight Romney is shining on stuff like this might spur Congress to close some of these loopholes. Maybe.

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We didn't know what to expect when we told you we needed to raise $400,000 before our fiscal year closed on June 30, and we're thrilled to report that our incredible community of readers contributed some $415,000 to help us keep charging as hard as we can during this crazy year.

You just sent an incredible message: that quality journalism doesn't have to answer to advertisers, billionaires, or hedge funds; that newsrooms can eke out an existence thanks primarily to the generosity of its readers. That's so powerful. Especially during what's been called a "media extinction event" when those looking to make a profit from the news pull back, the Mother Jones community steps in.

The months and years ahead won't be easy. Far from it. But there's no one we'd rather face the big challenges with than you, our committed and passionate readers, and our team of fearless reporters who show up every day.

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