By only releasing two years of tax information (and just one tax return), Mitt Romney has done something really fun: given us a mystery to solve! Reporters are siccing tax experts on the few extant bits of documentary evidence about Romney's taxes to extrapolate what all the returns from before 2010 might contain. Here's what the sleuths have come up with so far.


Theory: Mitt Romney paid no taxes in 2009.

Theorist: Bloomberg Businessweek's Joshua Green

Evidence: The financial crisis in 2008 cost the ultra-rich (wealth above $30 million) an average of 25 percent of their net worth, Green says. Romney fits in that category, and he probably felt major losses. "And it’s possible he suffered a large enough capital loss that, carried forward and coupled with his various offshore tax havens, he wound up paying no U.S. federal taxes at all in 2009," Green writes. 

Counter-evidence: Romney's campaign denied Wednesday that Romney has ever had a $0 tax bill, Politico's Alexander Burns reports.


Theory: Romney had a secret Swiss bank account, and revealed it under the IRS's amnesty program in 2009.

Theorist: Slate's Matt YglesiasNew York University's Daniel Shaviro (sort of)

Evidence: Romney had a Swiss bank account, which the lawyer managing his blind trust closed in late 2010. In 2008, a whistleblower at UBS, the Swiss bank where Romney had his account, told the IRS about 4,000 American account holders. The IRS offered an amnesty deal for account-holders who came forward in 2009. Yglesias speculates:

"Romney might well have thought in 2007 and 2008 that there was nothing to fear about a non-disclosed offshore account he'd set up years earlier precisely because it wasn't disclosed. But then came the settlement and the rush of non-disclosers to apply for the amnesty. Failing to apply for the amnesty and then getting charged by the IRS would have been both financially and politically disastrous. So amnesty it was."

Why else would Romney want a Swiss bank account, Shaviro told the Huffington Post. "It's unclear why he would have valued the Swiss bank account secrecy, and it wouldn't have enabled him legally to avoid U.S. tax... This is why there's speculation that he was into the amnesty program."

Counter-evidence: Bloomberg's Barro explains that Romney listed a "UBS Money Market Account" in a Federal Election Commission disclosure form in 2007. It wasn't "clearly flagged as Swiss, but it's there," Barro says. (Romney failed to report earned interest income on the $3 million account in a 2011 disclosure form, and had to amend it.) "It's possible that Romney told the FEC about the account while hiding it from the IRS, but that doesn't seem very smart."

(Photo via T@H!R via Flickr.)


Theory: Romney might have used his Swiss bank account to hide problematic transactions, like "any politically unpopular investments, clever and complex asset sales designed to lower Romney's tax bills."

Theorist: The Huffington Post's Zach Carter and Ryan Grim

Evidence: When Romney released his 2010 tax return, he did not release a separate document required by the IRS, called a Report on Foreign Bank and Financial Accounts, or FBAR. Romney would have needed to file an FBAR in his foreign accounts, because not doing so would incur a big fine. Other foreign accounts that didn't generate income, but instead just executed transactions, would not show up on the tax return, but would show up on the FBAR. "Romney may not have engaged in any of those activities" listed above, the Huffington Post says, "but his as-yet-unreleased 2010 FBAR would make it easier to determine whether or not he did."

Counter-evidence: Just as there is no real evidence for this speculation, there is no counter-evidence yet.


Theory: Romney might have engaged in "aggressive tax planning strategies that are legally, but not politically, defensible."

Theorist: Bloomberg's Josh Barro, New York University School of Law tax professor Daniel Shaviro, The New Yorker's John Cassidy, The Washington Post's Greg Sargent

Evidence: Barro took a look at Green's theory, and found that though Romney's taxes show he had no taxable capital gains in 2009, he had other income. Even with a lot of deductions, "it's unlikely that these factors alone could have added up to a tax bill of $0. Of the 35,000 high income taxpayers with no tax due in 2009, by far the largest share achieved that feat by investing heavily in tax-exempt municipal bonds." Romney was not heavily invested in municipal bonds. So if Romney has something politically damaging in his tax returns, it's probably something else, like aggressive tax planning strategies. Likewise, Shaviro says:

Still, willingness to do extremely aggressive tax sheltering (such as through loss generation from circular flows of cash) in 2009 would not come as a huge surprise, even though it seems like a dumb idea if you are preparing to run for president again.

Cassidy notes that while Romney's tax preparers might have had politics in mind in 2010 and 2011, they might not have thought about that in earlier years.

Counter-evidence: There is no counter-evidence so far, unless you count Tim Pawlenty telling CBS Wednesday that Romney's "paid a lot of taxes."

(Photo 401kcalculator.org via Images_of_Money via Flickr.)


Theory: The taxes might just show Romney made a ton of money, had more offshore accounts, and made controversial investments.

Theorist: The New Yorker's John Cassidy (sort of)

Evidence: Cassidy seems to think the most likely reason Romney won't show us the tax returns is that he paid an even lower tax rate than the 14 percent shown on the 2010 taxes. But there are other possibilities. Romney's retirement agreement with Bain ended in 2009, and "quite probably it allowed Romney to keep pocketing a substantial portion of the firm’s profits." Or maybe before 2010, Romney's money managers "were even more aggressive in their use of overseas investment vehicles and tax shields." Or maybe Bain invested in controversial firms like the medical waste company that disposes of aborted fetuses, a potential problem because 'even after he left, kept much of his money in investment funds managed by the firm."

Counter-evidence: Cassidy thinks these three theories are unlikely, because Romney's name is already tied to the first two -- being rich and having offshore accounts -- and the controversial investments wouldn't be worth all this tax return headache.