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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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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