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Tax-return questions haven't gone away

<p>For those interested in candidate transparency, the good news is, Mitt Romney agreed to release his 2011 tax returns on Friday afternoon.</p>

For those interested in candidate transparency, the good news is, Mitt Romney agreed to release his 2011 tax returns on Friday afternoon. The bad news is, 2011 isn't one of the important years in need of scrutiny. The worse news is, this limited disclosure actually raises as many questions as it answers.

Why do Romney's returns identify the United States as a "foreign country"? (Imagine if Obama's tax returns made this mistake.) Why is Romney investing so heavily in the nation's "number one geopolitical foe"? Of the 813 pages, why do two-thirds relate to overseas investments?

The Obama campaign remained on the offensive over the returns over the weekend, releasing this video.

Of particular interest to me, though, are the investments in the Cayman Islands. Team Romney published an online FAQ that coincided with the release of the 2011 returns that argued the candidate isn't evading American taxes with his offshore accounts.

"[T]he investments by the blind trusts in funds established in the Cayman Islands or other jurisdictions are taxed in the very same way they would be if the shares were held in the US rather than through a Cayman fund," the FAQ reads. "No taxes are evaded or reduced."

Something doesn't add up here. Why in the world would Romney stash cash in a notorious tax haven for no reason? Putting aside the blind-trust canard -- as Chris Hayes told Rachel on the show the other night, the trust is run by Romney's personal attorney, and really isn't "blind" at all -- if offshore Cayman accounts have nothing to do with evading or reducing taxes, why would he bother?

As it turns out, Team Romney is playing a misleading semantics game.

Timothy Noah did a nice job getting to the bottom of this, noting a Douglas Holz-Eakin piece in National Review, explaining that businesses put money into Cayman accounts so they're "outside the reach of the IRS." As Tim explained:

Now, it's my understanding that the IRS is in business to collect taxes. So if you want your money to be "outside the reach of the IRS" that means you don't want the IRS to take it away. How can Holz-Eakin and Romney claim otherwise?It turns out they're playing word games. The taxes you evade by putting your money in the Caymans aren't your own personal income taxes, but your offshore investment fund's corporate income taxes.... In other words, the Romneys aren't evading income taxes by putting their money in the Caymans. The fund they put their money into is evading taxes by parking itself in the Cayman Islands. As a result, that fund (and therefore the Romneys) get to keep more of the profits. Why evade taxes when you can get somebody to do it for you?

It's a clumsy ruse, and like far too much of Romney's rhetoric, it's predicated on the assumption that voters won't know the difference between fact and fiction.

Update: In 2010, Romney's running mate referred to the Cayman Islands as "the place you hide your money."