News from the Votemaster

Romney Camp Divided on Releasing Tax Returns

The story of Mitt Romney's tax returns continues to dominate the news and is now causing a split within the Romney camp itself. The problem is that the pressure to release them is building as more and more high-profile Republicans, now including Gov. Rick Perry (R-TX) and Rep. Ron Paul (R-TX), are calling for their release. From Romney's point of view, probably the most damaging call so far is an editorial in the National Review Online, the digital arm of the National Review telling him to get it over with and release them. The National Review has been America's premiere conservative magazine since its founding by the legendary William F. Buckley, Jr. in 1955. Even political opponents of the magazine have always respected it for its civil tone and well-reasoned arguments. According to Wikipedia, the National Review Online Website gets more hits per day than all other conservative magazine Websites combined. When its editors think Romney should release his returns, Romney cannot argue that it is just partisan Democrats who want to dig for dirt. While some Republican strategists think he will ultimately have to release more, the buck stops with Romney himself.

Despite the increasing pressure, Romney is holding steady and saying he is not going to release any more. Period. If there is one thing Romney is really good at, it is estimating risk. His whole business career was built on his ability to spot suitable takeover targets and estimate whether he could make enough money from them to take the risk of ending up holding an empty bag. He knows what is in those returns and has apparently decided that the danger of releasing them is worth allowing Obama to create an image of him as a rich guy who uses fancy accountants to just stay barely within the law. What could possibly be in there? One story has six hypotheses:

1. His income in some years was even higher than we think it is
2. His tax rate in some years might have been (close to) zero
3. He might actually have something to hide
4. Huge donations to the Mormon church might raise questions
5. He is just being arrogant
6. The returns are perfectly OK but would divert attention to them for weeks

Aside from the tax returns themselves, there is another piece of documentation that hasn't been in the news much, his FBAR reports. Anyone with foreign bank accounts is required by law to file a form annually with the Treasury Dept. listing them all and telling how much money is in each one. Romney's accountants certainly know this and he no doubt filed, but those reports would show how much money he had stashed outside America. While there is no limit on how much you can have in foreign countries as long as you report it on the FBAR form, people will wonder why he had so much abroad if he was paying taxes on it.

Yet another financial issue that hasn't had much press is Romney's IRA, known to be worth between $21 million and $102 million. How did he get so much money into a tax-deferred account? If he used a SEP-IRA his employer, Bain Capital, could have contributed a maximum of $450,000 during his tenure there. How did it grow so fast? One theory is that Bain contributed the stock of companies it had bought and valued them very low. If, for example, Bain valued each share of stock at 1 cent, it could have contributed up to 45 million shares of stock to the IRA. Some of these have gone up 1000x or more. Releasing this information would immediately lead to a discussion of whether the valuations where reasonable, something Romney does not need.

Finally, there is one other thing that is may be keeping Romney awake at night. The tax returns are not locked away in Fort Knox. They are on the IRS computers. While Obama is not legally allowed to look at them, he is certainly allowed to call the Commissioner of Internal Revenue and ask him to check if Romney obeyed the law. Then a week later he could invite the Commissioner to a private (i.e., no aides) meeting at the White House to discuss new legislation to combat tax shelters and help reduce the deficit. You fill in the rest of the story. The Commissioner, Douglas Shulman, a Bush appointee, could be reappointed in 2013 if Obama wins and Shulman pleases the President. Obama reappointed Bush's Federal Reserve Chairman, Ben Bernanke, so he has a history of reconfirming Bush appointees. Would Obama do this? Would Shulman play ball? Who knows? But Romney has to take this possibility into account.

Wealthy Republican Senate Candidates Picking Up Steam

A number of self-funding Republicans embroiled in bitter primary fights for Senate nominations are getting traction. These include Wil Cardon in Arizona (running against Rep. Jeff Flake), Eric Hovde in Wisconsin (running against former governor Tommy Thompson and Rep. Mark Neumann), John Brunner in Missouri (running against former state Treasurer Sarah Steelman and Rep. Todd Akin), and Linda McMahon in Connecticut (running against former representative Chris Shays). None of them have held elective office before, which means they have no record for oppo researchers to pick apart. On the other hand, all of them are tea party favorites and recent history shows that when a tea party candidate defeats the establishment favorite in the primary, the Democrats are often able to hang onto a seat they would otherwise have lost (think: Delaware, Colorado, and Nevada in 2010). In all four of the above cases, the late date of the primary makes the problem even greater since there is less time for intraparty wounds to heal. If the establishment candidate is attacked all through August by a vast number of negative television ads, the winner can't expect the loser and his supporters to instantly forget everything on Sept. 1 and enthusiastically support the person who had attacked them so bitterly only weeks ago.

These aren't the only tight races, of course. Massachusetts, Montana, North Dakota, Virginia, Indiana, and Florida are all expected to be close. Strategists for both parties are busy looking at all scenarios, but nobody really knows what is going to happen. There are too many unknowns at this point.

Could Foreign Policy Become a Campaign Issue?

Up until now, foreign policy has played virtually no role in the campaign. However, events elsewhere could change things. A massive bombing in Syria could mean that the current regime is nearing its end. Suppose it fell. It wouldn't be hard for Obama to argue that he has the wisdom needed to be Commander-in-Chief. He knows when to actively intervene in foreign affairs (killing bin Laden) and when to work behind the scenes (Egypt, Libya, and Syria). Romney has no foreign-policy experience at all and definitely does not want to change the subject to it, but events could allow Obama to do so easily.

Today's Presidential Polls

The presidential race appears to be tightening in New Mexico, where Obama's former lead of 15 points has dwindled to 5 points. Polls have shown that if Romney picks Gov. Susana Martinez (R-NM) as his running mate, he has a decent shot at winning the state, not to mention gaining more votes among women and Latinos. Martinez has said she doesn't want the job because she has to care for her elderly father and ill sister, but Romney could offer to hire a team of registered nurses to take care of them full time. The real downside of Martinez is the inevitable comparisons with Sarah Palin, even though Martinez is nothing like Palin.

State	Obama	Romney		Start	End	Pollster
New Jersey	49%	38%		Jul 09	Jul 15	Quinnipiac U.
New Mexico	49%	44%		Jul 13	Jul 16	PPP
Virginia	47%	46%		Jul 16	Jul 17	Rasmussen

Today's Senate Polls

State	Democrat	D %	Republican	R %	I	I %	Start	End	Pollster
New Jersey	Bob Menendez	47%	Joseph Kyrillos	34%			Jul 09	Jul 15	Quinnipiac U.

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---The Votemaster