Explaining Southern California's economy

Romney tax returns: What would we learn?

Republican presidential hopeful Mitt Rom

EMMANUEL DUNAND/AFP/Getty Images

Republican presidential hopeful Mitt Romney addresses a primary night victory rally in Manchester, New Hampshire, January 10, 2012. AFP PHOTO/Emmanuel Dunand (Photo credit should read EMMANUEL DUNAND/AFP/Getty Images)

At last night's Republican debate, Mitt Romney said that if he sews up the nomination, he would likely release his tax returns, as opponents and the Obama Administration have demanded. This is from USA Today:

I think I've heard enough from folks saying, look, let's see your tax records. I have nothing in them that suggests there's any problem and I'm happy to do so. I sort of feel like we are showing a lot of exposure at this point. And if I become our nominee, and what's happened in history is people have released them in about April of the coming year and that's probably what I would do.

OK, so Romney isn't necessarily the most blissfully fluid speaker in the land. It's hard to blame him for nonlinear sentence structure after the 734 debates he's endured in his quest to take on the president in November. But a more important question looms: What would we learn from Romney taxes?

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Mitt Romney and Bain Capital: He did what he had to do

Republican presidential hopeful Mitt Rom

JEWEL SAMAD/AFP/Getty Images

Mitt Romney has been taking it on the chin from the unlikeliest of places: his fellow Republican candidates, especially Newt Gingrich, have claimed that Romney's time at private-equity firm Bain Capital was all about killing jobs, not creating them. Mitt says he "created" 100,000 jobs. Not so fast, say his detractors.

At the Huffington Post, Robert Lipton explains why this he-said/he-said doesn't entirely make sense:

The reality is both more simple and more complex than all those allegations would have one believe. It is simple because the function of Bain and other private equity funds has no planned relation to job creation or job losses. It is more complex, because the activities of Bain do tell us something about Mitt Romney -- having nothing to do with jobs. Let's look at how Bain and other private equity companies actually operate.

The business goal of private equity companies is to make profits for investors in the equity funds they manage. The greater the profits for the investors, the larger the take of the fund managers, who typically receive a base management fee of about 2 percent plus a portion of the fund profits, generally around 20 percent. If the fund manager is very successful then the manager's participation in profits may run as high as 30 percent, which investors may be prepared to accept just to be able to invest with that manager. We're told that Bain was very successful in creating very high returns on investment for its investors, said to be an astounding 88 percent per year, to the point where it could get 30 percent participation in profits. One tax advantage of the fund mangers is that although their business is to get paid by creating values, unlike other payment for services, which is taxed as ordinary income, their return for their services is treated as capital gain and taxed at the lower capital gains rate.

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Microsoft is back in the driver's seat on Yahoo deal

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A Yahoo! billboard is visible through trees in San Francisco, California.

I used to think that Microsoft should buy Yahoo. It didn't in 2008 — although that was less about Microsoft than it was about Yahoo's unwillingness to sell. Now that Yahoo has entered something of a tailspin, canning its CEO and exploring some sale options, Microsoft is back. And oh boy! What a deal it's looking to make.

But I now don't think Microsoft should buy Yahoo.

This is from the Wall Street Journal:

Potential suitors said they believe Yahoo’s inherent value is lower than its current share price of about $16.12, which they say includes a “deal premium” reflecting investors’ anticipation of the sale of Yahoo, people familiar with the matter said. The stock has run up since Carol Bartz was ousted as chief executive last month and Yahoo launched a strategic review.

In 2008, Microsoft was offering $31/share. It's traded as low as about $11. I'd say it's worth way more than $16, but in any case, Microsoft is now positioning itself to take a sweet stake, in preferred shares. I think this lessens the chance that I'll get my wish, which is to have Yahoo shed its identify as a tech company and remake itself as a Southern California-based online entertainment juggernaut. Microsoft doesn't need to be buying it. Disney does.

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