Increasingly, everyone (including Republicans such as George Will, Matthew Dowd, and William Kristol) agrees that the reason for Romney's reluctance to release any pre-2010 tax return might be that what it would show is worse than all the heat he is taking for non-disclosure.
But what could that be? Well, I certainly don't know either, but here are some salient points:
1) We know from the 2010 tax return, in which he had a net capital loss carryforward from 2009, that he zeroed out his net capital gains - including from carried interest Bain income - in 2009.
2) 2009 was the last year in which he received certain Bain payments as the playout of his "retroactive retirement."
3) It's been hard to understand what benefit he thought he was getting from the Swiss bank account, and there was an IRS amnesty program in 2009 for fraudulent nondisclosure of offshore income. If he had to come clean in 2009, this might be embarrassing, especially given that there was an iron fist inside the IRS leniency offer (i.e., if you held out, they might get you without any amnesty).
From the first two items above, it may be a reasonable guess that Romney had a lot more gross income in 2009 than 2010 and 2011, yet paid less tax or even zero tax.
This might have had to involve, not just zeroing out capital gains via "loss harvesting" in response to the down 2009 stock market. but also creating tax shelter losses to offset ordinary income.
We know from attachments to the 2010 return that some of his "blind trusts" were engaged in transactions identified by the IRS in Notice 2002-35, which pertains to fake loss-generating scams that involved abusing and misinterpreting the notional principal contract regulations. So far as the blind trust aspect of that is concerned, note that Romney himself once called blind trusts an "age-old ruse." But I am unclear about how much to make of the 2010 disclosure, given that it would have undermined expecting to get the tax benefits if the deals at issue were complete scams. So it has struck me as conceivable that the blind trusts did something in the ballpark of required 2002-35 disclosure but less extreme and more legally defensible.
Still, willingness to do extremely aggressive tax sheltering (such as through loss generation from circular flows of cash) in 2009 would not come as a huge surprise, even though it seems like a dumb idea if you are preparing to run for president again. I wonder if the very fact that he was running for president might have led him to figure that he was audit-proof, on the ground that the IRS would look too political if it started challenging things.
I'm not sure how much credence to give this, but a Huffington Post commentator claims that, "according to people close to the situation, Romney would drop out of the presidential race before ever releasing further tax returns." That certainly sounds dire, and a huge 2009 gross income plus huge claimed losses, perhaps even topped off by amnesty income reports, would be one way of getting there.