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Could the Overseas Voluntary Disclosure Program be why Romney won't release his tax returns?

Asked by Patton (2344points) August 17th, 2012

There are a lot of theories about why presidential candidate Mitt Romney might not be releasing his tax returns, and we cannot know for sure what his reason is while they remain out of sight. We might not know for sure even if he releases them, though we might be able to make better informed guesses. I have a theory that brings together a lot of the evidence, though, and I am curious what others think of it.

The Overseas Voluntary Disclosure Program (OVDP) is an occasional IRS program that allows taxpayers who have been hiding money in offshore accounts to avoid penalties by voluntarily disclosing that money on a current tax return. Taxpayers who take advantage of OVDP can claim any hidden money from the previous eight years without being subject to prosecution.

The IRS has offered this dispensation intermittently over the past few years. The first occurrence of OVDP was in 2009. If Romney took advantage of this program, his tax returns would indicate that he had admitted to committing a federal crime while avoiding punishment for it. This would tend to undermine his claim that he has followed all tax laws scrupulously, though he might say that the existence of OVDP retroactively makes this claim true despite how it might look from the outside.

Romney released his 2010 tax return and will supposedly release his 2011 tax return (rather than just the estimate he has released so far). But these would not show any evidence of the Romney’s availing themselves of OVDP. Neither would any tax returns from before 2009, but it would be very suspicious for him to release returns going back to 2000 while skipping that one year.

It would also make sense of Harry Reid’s claim that a source informed him that Romney has not paid taxes in ten years. If the source meant that Romney had been dodging taxes on a significant portion of his income and then took advantage of OVDP to catch up on eight years worth, then Reid might have misunderstood that to mean Romney had literally not paid anything for ten years (which seems impossible to do without getting caught). Reid could also be exaggerating or just flat out lying, but the numbers fit when you allow for a little bit of rounding up.

This is just one theory, and it I know it could be completely mistaken. It seems plausible, though, and that plausibility seems to make the tax returns a legitimate issue in a campaign that promises to focus a lot on economic issues like taxation and distributive justice.

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