Ayn Rand, Paul Ryan, Self-Reliance, And Taxes

Much has been in the news since Paul Ryan was chosen as Romney’s VP candidate about Ayn Rand, whom Mr. Ryan is known to have highly regarded. As one familiar with much of what Ms. Rand wrote, I have been disappointed in how her views are being represented by the liberal side of thought in such a negative and condemning manner.

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Ryan has of late - abandoned his admiration of Rand’s views, for reasons not very clear. Interestingly, the characteristic of Ryan most have commented on in favorable terms, is Paul Ryan’s self-reliance. This is the essence of what Ayn Rand stood for, and how she herself, lived her own life.

Self-reliance is the soul of American character and life. It is the key of our democracy. In the words of Rand, it is based upon an individual’s own “motive power”.  We are a country of immigrants: the hardiest stock of all, and founded in individualism.

The power; shall we say, the “self-power” of the individual is what Ayn Rand was trying to point out in her novel Atlas Shrugged. In this book of larger than life personalities, she showed us the power of each individual to define their life as a “producer” or as a “looter”.

How does this connect to taxes, meaning income or estate taxes? Well, we all have the power, and the right - to keep our taxes to the lowest cost possible. To do so is self-reliant: it is up to you.

I think Ms. Rand said many ridiculous things, in addition to being a beautiful writer and novelist. She is reported to have been an adulterer, atheist, to not believe in families, to think all people should live as she said they should. I do not think this is representative of her core beliefs, though many of reported comments appear to be true.

What matters in life is not what we have, or what we get. What matters is what we do. In this sense, both Paul Ryan and Ayn Rand have very much in common: they both made the best of difficult life circumstances from a young age. And they share the virtue of self-reliance.

The above is not in support of Ryan’s political views; I am a centrist.

The Romney Tax Rate

I want the Romney Tax Rate. I want it for myself, and I want it for my firm’s clients. But we cannot have it because we have too much “earned income”. Romney did not, and does not. I will discuss this further in another post.

An excellent piece written by Michael Graetz, Mitt Romney’s Financial Mysteries, published last week by the New York Times, highlights the areas where Romney has perhaps advantaged himself at the cost of other US citizens. The author, a former Bush Administration tax official and current tax law professor, knows what he is talking about: that by investing probable severely undervalued assets into his IRA account, these assets later “bloomed” within the Romney IRA. There is no other way to have an IRA account of over $100 million, because the Internal Revenue Code annual contribution limits are simply too small. 

The annual limit on IRA contributions in general, set by statute, has never been more than at the most, $50,000 per year. Assuming Mr. Romney contributed for 20 years; at up to $50K per year, this would $1 million in total contributions.  For a fund to grow to $101 million over 20 years, assuming the funds came in over time, (meaning not all at once as most IRA funds do), would be a financial performance beyond compare. A more likely explanation is the one given in the article; that of undervalued assets being contributed to a self-directed IRA, which then, magically become worth much more than they were worth when contributed. A private equity fund carried interest is one of the few asset types capable of this level of performance. While this is not per se illegal, it is a tax avoidance device. If so, we would think it could be discussed openly, for someone seeking to be President. Being accountable for one’s actions, goes with this territory.

Romney is being asked to release his tax returns by a growing chorus within his own party. They feel his refusal is becoming a liability to him being elected. Romney’s refusal to release his income tax returns, not to mention the off-shore holding of his family assets says he doesn’t think he has to. It may also say that he can’t… it would be too explosive. People would be outraged to know what this “common man” has done. The methodology is politically suspect and may even be legally suspect; another (very) good reason for not releasing. Romney was recently quoted as also saying he “had been audited, too”. One wonders what the result of that was.

Read the piece. It renders clarity in an area confusing to most.