Tax breaks and legal bribes keep rich people rich
Trinity College should give Todd Dagres of the Class of 1982 an especially nice welcome if he shows up in Hartford for his 30th reunion this spring. He’s a really hot prospect for the alumni fund, having the wherewithal to endow several professorships with what he saves on taxes alone.
There was a story in The Washington Post the other day about how private equity types “work the angles to keep from paying taxes” and the Trinity graduate was Exhibit A.
That’s because Dagres paid no taxes on $3.5 million he earned in income and capital gains one recent year, and he beat the IRS in court when it tried to bill him for more than $1 million in back taxes and penalties. You can do that when you’re a venture capitalist like Dagres or, need I say it, Mitt Romney.
Dagres raises funds to buy and invest in new and existing businesses and he’s extremely good at it. The Post reported he once made $800 million for his clients on a $15 million investment in a single business.
“It’s a performance-based business,” Dagres told the court in 2009, when his case came to trial. “If we perform well, we’re compensated well. If we don’t perform well, we’re not.”
Because of their patriotic willingness to take risks with other people’s money, a grateful nation gives wonderful tax breaks to venture capitalists like Dagres and Romney, to select two members of the species at random.
Over a five-year period, The Post reported Dagres paid 20 percent of his total income of $59.5 million in taxes. That’s barely more than half the average middle class family’s tax rate.
We haven’t known how much venture capitalist Romney paid in taxes because Romney, who still receives a cut from the profits of his firm, Bain Capital, didn’t release any of his tax returns until failing to do so cost him South Carolina and maybe more.
Under considerable pressure to make his returns public, Romney first said he might release some returns around “tax time” in April, hoping he’d have the nomination in sight or clinched by then. He won’t.
Now that he’s released his most recent tax data, he’ll still be under pressure for returns from his active years with Bain Capital to let the public know if he consistently paid at a rate of 15 percent, thanks to the exceptions made for those great Americans who labor in the venture vineyards.
To be sure these splendid tax breaks continue, the financial services industry has worked hard to provide Congress with legal bribes disguised as contributions, to be honest about the system.
The Post report on Dagres singled out Democrats from New York and Connecticut who “have faithfully represented and been rewarded by their Wall Street constituents,” with Sen. Charles Schumer receiving $18 million from the financial sector over two decades and Chris Dodd, $14.5 million.
The industry is also generous to Republicans, especially House Majority Leader Eric Cantor, who picked up $5.8 million in 12 years. His wife is a former Goldman Sachs vice president and that firm continues to lead financial sector donors with $2 million given to our Congressmen and women so far this election cycle, followed by the now famous Bain Capital, at $1.8 million.
What Bain paid its founder and CEO and how much he paid in federal taxes are of greater interest because of Romney’s inexplicable resistance to making his returns public, something every presidential candidate since Richard Nixon and Romney’s father, George Romney, have done for four decades.
Newt Gingrich released his return and no one cared, but Romney foolishly encouraged the suspicion that he’s hiding something big. That impression remains and will remain until he releases about a dozen years of tax returns, as his father did.
For example, did Romney ever go as far as Dagres, and avoid taxes completely during an especially venturesome year? Probably not, because paying no taxes would be a very dumb move for someone interested in running for president. Fifteen percent is bad enough; zero percent would leave voters confusing Romney with General Electric or Al Capone.
Simsbury resident Dick Ahles is a retired journalist. Email him at email@example.com.