I don’t know jack about an effective tax rate on adjusted gross income versus capital gains investments, about all the loopholes and shelters and hidey-places for money. Just a working stiff, here. But I do know one thing: The summary that Romney’s accounting firm, PricewaterhouseCoopers, released in lieu of 20 years of Romney’s official tax returns is insufficient. Well, I guess I know two things, because I also know there’s something hinky about this whole deal. I know that Romney’s attempting to trick the voting public into thinking his tax rate is more in line with what people think rich folks should be paying. I know that he chose not to take a charitable deduction he could have taken so he could keep that tax rate lower for “political correctness”. I also know that Ann and Mitt Romney can go back later and amend the return, take those charitable deductions and get their half a mil back. In the minds of people, like the Romneys, used to issuing edicts and not caving to questions by “you people,” this is a win-win . . . Well, unless you’re trying to build trust, in which case it’s a very bad “lose.”
I rely largely on other experts and smarter people to figure tricky stuff out for me, and after reading about the ins and outs of Romneys’ 20-year tax rate revelation, I now know why it is, in fact, hinky.
Pricewaterhouse, in its missive to assuage the public on Sir Romney’s behalf, said that Romney paid an “average annual effective federal rate” of 20.2 percent over 20 years (the two years of tax returns we have seen, 2010 and 2011, reflect tax rates of 13.9% and 14.1%, respectively). According to Huffington Post’s Ryan Grim, “. . . [I]t is a meaningless figure.”
Experts have proposed a few scenarios as to why this number doesn’t really answer the question the public is asking.
First, without going into the scary accounting details, the upshot is that, because the tax rate is based on Romney’s adjusted gross income, if Romney had some investment profits and some losses and some other financial trickery going on, his adjusted gross income could be pretty much whatever he wanted it to be. For all we know, he paid taxes on income of $50,000, instead of $50 million.
Second, there’s that little bait and switch on the IRA account. As Ryan Grim wrote, “Boston College tax law professor Brian Galle noted that Romney’s IRA has grown since 1999 at a rate of roughly $9 million to $10 million per year. Yet he pays no taxes on those gains. Adding $10 million to his 2011 income of $13.8 million, for instance, nearly doubles it, meaning his tax rate is roughly half of what his real gain was. ’Mitt Romney was paid an immense amount for services rendered and is not putting it in his income. …To say he has a 14 percent rate doesn’t capture the economic reality of what’s happening . . . It’s more like Romney has a salary of $10 million and he’s paying 14 percent on $1 million and the rest just isn’t included.’”
Washington Post’s Greg Sargent depicted a third scenario that could make that 20% number one that’s just pulled out of a hat: ”If Romney paid his lowest rates in a number of the higher income years, the overall 20 percent figure would overstate the rate he actually paid over the whole period . . . ‘Let’s say you have 10 years in which you paid 13 percent in taxes, and 10 years in which you paid 27 percent. If you average those rates, you’ll get an overall rate of 20 percent. But if the 13 percent years were highincome years, and the 27 percent years were low income years, then his total taxes paid as a share of total income over the 20 years would be less, perhaps significantly less, than 20 percent.”’
Investigative journalist David Cay Johnston believes there’s a fourth scenario, as well: ”The tax preparers specifically and repeatedly use the term ‘owed’ rather than ‘paid’ and, as Johnston noted on MSNBC, “The word ‘owed’ is important because it suggests that there was an audit that resulted in a large payment of tax later because they underpaid the tax, an amended tax return by the Romney’s, or an obligation that they didn’t pay for some number of years. So I wrote the campaign and asked them, and they know this statement is going to be very closely scrutinized. And this is after all a verb. Why didn’t they say ‘paid?’ The short answer that I got back was: ‘Not answering that question.’”
A very high-profile politician once said of another very high-profile politican, “It’s time the biggest-taxing senator in Washington [Ted Kennedy] shows the people of Massachusetts how much he pays in taxes . . . .”
Yes indeed, Mitt Romney, and thank you for so eloquently calling for full disclosure in tax returns. Now, put your damn money where your stupid mouth is.