Romney Energy Plan Means More Costs For Taxpayers, More Profits For Big Business

August 25, 2012   By Nathaniel Downes  Creative Commons License                           Addicting Info

The Romney/Ryan team has at long last released their energy plan. What is inside is disturbing, not just for their gross negligence in making wildly inaccurate claims about the Wright brothers to even failing to grasp when fiscal years begin (a very bad sign for someone running on their business experience). It is clear from reading the document that whomever put it together is attempting to hoodwink the American people with buzzwords and catch phrases, hoping that people don’t actually read the document to understand it.

The first catch phrase he throws around is “Energy Independence.” This is a common Republican refrain, so it comes as no surprise to see it here. What is surprising, however, is that it is now part of a much larger phrase, “North American Energy Independence.” For his plan to work, the US will need to tap the oil from Canada, Mexico, and Central America, without restriction. This of course means the US takes all the oil from them, willing or not. Is Romney planning on a war with our bordering neighbors?

He then talks about eliminating federal controls on federal lands, handing mineral and resource rights over to the states. Of course, when has air or water stopped at state borders? How many people in Florida would be happy when Georgia starts dumping coal ash into the tributaries which flow into the states agricultural basin? Romney is right in that this would grow something, but that would be federal lawsuits and injunctions, causing an already slow permitting process to effectively grind to a complete halt.

He then goes to length in discussing opening up offshore areas for drilling. Not some areas, all areas. Oil rigs off of Virginia’s scenic beaches, within eyesight of the residents of the nation’s capital when they go to the beach. And Virginia is first on Romney’s list for oil exploitation. Oh and the state control of permits would be only for onshore exploitation, all offshore would stay federally controlled, but be fast-tracked for rapid decisions.

One interesting bit of the plan however is that the federal government would “Ensure accurate assessment of energy resources.” The government’s job now would be to find these oil fields, survey them, detail it all out, for the oil companies to profit from. Socializing the costs while privatizing the wealth. This would further increase oil company profits while leaving the US taxpayer the bill.

Of course, new energy is not left out in the cold. Oh wait, yes it is, with the complete elimination of government subsidies and development for anything other than fossil fuel technologies. Bye bye solar, hello coal gas. And cut those clean air standards while we’re at it, cannot do anything to hurt the drive to make a buck.

To back up his positions he turns to energy experts…. no, wait, he turns to banks and investment brokers. With the lions share of his positions backed up not by energy firms, or by experts in the field, we find Bloomberg, Citigroup, Raymond James… not a single piece of industry inside information. He then compared years he called the George Bush years to Barack Obama years to compare permit rates, but then messes those up, giving Obama the last Bush year. Of course the year being given Obama is the Fiscal Year 2009, running from October 2008-September 2009, the last year of the Bush administration’s budget. It also puts the entire economic downturn, with the reduction in permit applications, solidly into an administration which did not even take office for months after the fiscal year began.

Or did he mess up at all, and it is intentionally done that way, lying about Obama’s record in order to make his case to the American people? Considering his earlier declaration of energy independence only if we become economic slaves to Canada and Mexico, or otherwise invade them or annex them to become part of some grand North American Union, I suspect that it is in fact intentional.

Dates do seem to be a problem for the Romney plan, however. At one part he proclaims that “Utah Has Regulated Fracking For Over 50 Years Without A Single Reported Case Of Water Contamination” while neglecting to notice that the page he is citing is referring to limestone deposits, not the oil shale gas fracking which is what the current issues are about. He also talks about the “past four years of Obama’s energy policy” when Obama has not been in office for that long.

The report goes to great length in discussing the natural gas reserves, ignoring that natural gas expansion has been due in large part to Obama’s embrace of the resource since taking office. If you read the Romney plan, it sounded like natural gas exploration was run by private enterprise without any government oversight, then in fact without the governments investment in R&D into gas extraction technologies in the 1970′s and 1980′s, we would not have a natural gas industry today.

And of course, the real enemy for Romney comes out, when he blames environmentalists for all of the woes of the nation. The plan blames them for blocking anything and everything, but even then the examples he cites fails to meet the grade. He cited the Antelope Valley Solar Ranch for being blocked by environmentalists, but doing even quick research revealed that the permitting issue had to do with construction permits due to earthquake codes. Last time I checked earthquakes were not a high level environmentalist issue.

Once we have expanded our resource exploitation, of course, it means energy independence, right? Wrong. In his plan it talks at length about exporting these resources. We’d not even be using them ourselves, but shipping them to India and China, both mentioned by name in the report. All of make more money for the 1%.

In the end, the entire Romney energy plan looks to be little more than big government handouts to big energy, with the US taxpayer put on the line to pay for it all. His plan is short sighted, foolish and most of all demonstrates no loyalty to the United States, making us ever more enslaved to the world market. This is a plan for third world status, identical to a plan you would find for Nigeria. And we all know how well that worked out.

Technorati Tags: Mitt Romney,Paul Ryan,Energy Plan,Oil Subsidies,Current Events,2012 Election,Trickle-Up Economics

Bain Files: Tax Experts Find Shady, Possibly Illegal, Dealings In Documents Related To Romney's Bain Investments

Tax experts poring over leaked confidential documents from Boston-based Bain Capital in which Mitt Romney and his wife have invested millions of dollars have found the private equity firm used some head-shaking but perfectly legal tax-avoidance techniques as well as at least one that probably is outside the law. Bain manages $65 billion in assets.

Romney, who founded Bain in 1984 and remained with the firm until 1999 or 2001 or 2002, depending on whom you talk to, receives significant income from Bain as part of his retirement package. Some of the investments that are part of this package were created after he left the firm. His financial advisers have also invested additional money from his personal fortune, estimated at a quarter-billion dollars, in the Bain's highly complex instruments.

The 950 pages of documents were posted on line Thursday by the website Gawker.com. They include audited financial statements, investor correspondence and other material that outsiders were not supposed to see. A Bain spokesman lamented their disclosure. The documents also contain some new details of Romney's investments. While some of Bain's investments are publicly known, others are not, and Romney has refused to discuss the underlying assets on his federally required public disclosure forms. Gawker did not say where or how it obtained the documents. It asked readers with expertise for help in decoding them.

One of those experts who stepped forward, according to the New York Times, is Victor Fleischer, a law professor at the University of Colorado. On his A Taxing Blog late Thursday, Fleischer wrote about the conversion of management fees into "carried interest" as a means of sharply reducing tax liabilities. That is something Romney did in at least one of the funds included in the documents, Bain Capital Fund VII. Romney has more than $1 million in Fund VII.

Private-equity firm managers get paid two ways, with fees and carried interest. The fees are what the firm charges companies it acquires for overhead, salaries and the like, usually two percent. These are taxed as regular income. When you make what these guys do, that's at the 35 percent rate. Carried interest, however, is taxed at the capital gains rate of 15 percent. So partners sometimes waive the fee, expecting to benefit from future profits. Fleischer:

There are many variations on the theme, but here’s how many deals worked: each year, before the annual management fee comes due, the fund manager waives the management fee in exchange for a priority allocation of future profits.  There is minimal economic risk involved; as long as the fund, at some point, has a profitable quarter, the managers get paid.  (If the managers don’t foresee any future profits, they won’t waive the fees, and they will take cash instead.)   In exchange for a minimal amount of economic risk, the tax benefit is enormous: the compensation is transformed from ordinary income (taxed at 35%) into capital gain (taxed at 15%).  Because the management fees for a large private equity fund can be ten or twenty million per year, the tax dodge can literally save millions in taxes every year. [...]

Unlike carried interest, which is unseemly but perfectly legal, Bain’s management fee conversions are not legal.  If challenged in court, Bain would lose. The Bain partners, in my opinion, misreported their income if they reported these converted fees as capital gain instead of ordinary income.

Bloomberg reported that "the documents also show how deeply embedded Bain has become in the offshore tax-haven world with funds organized in the Cayman Islands."

The entire purpose behind the offshore operations is to allow foreign investors to avoid paying taxes on profits produced by the companies Bain and other private-equity operations manage. During the 15 years Romney claims he was at Bain, the firm took $6.75 billion in return on $1.91 billion invested in some 150 companies, according to Thomson Reuters Corp.’s PeHUB.

A spokesman for the Romney campaign said the candidate and his wife have no control over where their assets are invested because they are held in a blind trust.

However, as Ryan Grim at the Huffington Post reported, if Bain "used improper tax-avoidance techniques, the Romneys would be required to amend their returns regardless of the blind nature of the investments."

That might include amendments because of another questionable technique:

[...] owning U.S. dividend-paying stocks in an offshore account and pretending, for accounting purposes, not to own the stock. Instead, the taxpayer tells the Internal Revenue Service that he owns a derivative product that is identical in every way to the stock—except it isn't the stock, so therefore no U.S. taxes are owed. It's called a "total return equity swap," because the buyer still gets the benefit—the "total return"—of owning the stock, or equity.

"This use of total return equity swaps, such as to avoid the U.S. dividend withholding tax, was very widespread for more than a decade, and may not be dead yet, although the IRS issued a shot-across-the-bow Notice concerning the practice in 2010," writes Daniel Shaviro, the Wayne Perry Professor of Taxation at New York University School of Law. "But taxpayers who engaged in it to avoid the dividend withholding tax were coming perilously close to committing tax fraud, in cases where the economic equivalence to direct ownership was too great."

As if there weren't enough reason to demand that Romney show us his tax returns, the Bain documents show the kinds of things that such disclosure might shed some light on. And these are, of course, just what one website has been able to get its hands on.

Originally posted to Meteor Blades on Fri Aug 24, 2012

Technorati Tags: Mitt Romney,S.E.C.,Bain Capital,Tax Loop-Holes,2012 Elections,Current Events