Dance of the twenty-two veils

Mitt’s un-revealing tax “summary”.

The letter  “summarising” the Romneys’ tax returns from  their tax preparer, PricewaterhouseCoopers, states:

  • The lowest of any annual “effective federal personal income tax rate” for any year during the period is 13.66%…
  • The average of the annual “effective federal personal income tax rates” as computed based on the returns as prepared during the period is 20.20%.

The period in question isn’t the standard ten years as released by Obama and Biden, and reportedly required of Ryan by the Romney campaign: it’s the 20 years 1990-2009, taking the total to 22 with the fully released 2010 and 2011. So it includes the decade Mitt Romney was actively running Bain Capital, and the last decade when he was a politician and in theory a sleeping partner in Bain. The inference is that the Romneys’ taxes were higher – perhaps much higher – in the superfluous first period. The tax shelters created by Romney the capitalist for Romney the rentier were perhaps just too good for public scrutiny.

The inference is also supported by PWC’s careful choice of an arithmetical mean of the annual tax rates, not a mean of all tax and income over the period: so (picking numbers with a pin) if the Romneys paid 35% on $1m in 1992, and 5% on $20m in 2008, the PWC average of the two years is 20%, but it’s 6.4% if you gross up the two years first.

PWC swear that the Romneys paid both state and federal income taxes in every year. Unless PWC are flat-out lying, which doesn’t seem likely, Harry Reid’s accusation that the Romneys paid no federal income tax at all in some years is refuted. (It’s possible they paid next to nothing.) But Reid is not running for re-election this year and Obama has not associated himself with the smear, so the refutation is not very useful politically. BTW, my bright idea that maybe Romney was cheating on tithes also falls.

This one isn’t over. The PWC letter is very carefully drafted.  It relates narrowly to declared taxable income – “adjusted gross income as shown on the federal income tax returns as prepared”. So it omits any income vanished into something else by expensive accounting magic.

The question still stands: what shameful secret is Romney hiding?

Author: James Wimberley

James Wimberley (b. 1946, an Englishman raised in the Channel Islands. three adult children) is a former career international bureaucrat with the Council of Europe in Strasbourg. His main achievements there were the Lisbon Convention on recognition of qualifications and the Kosovo law on school education. He retired in 2006 to a little white house in Andalucia, His first wife Patricia Morris died in 2009 after a long illness. He remarried in 2011. to the former Brazilian TV actress Lu Mendonça. The cat overlords are now three. I suppose I've been invited to join real scholars on the list because my skills, acquired in a decade of technical assistance work in eastern Europe, include being able to ask faux-naïf questions like the exotic Persians and Chinese of eighteenth-century philosophical fiction. So I'm quite comfortable in the role of country-cousin blogger with a European perspective. The other specialised skill I learnt was making toasts with a moral in the course of drunken Caucasian banquets. I'm open to expenses-paid offers to retell Noah the great Armenian and Columbus, the orange, and university reform in Georgia. James Wimberley's occasional publications on the web

64 thoughts on “Dance of the twenty-two veils”

  1. = = = PWC swear that the Romneys paid both state and federal income taxes in every year. = = =

    Did they report on whether that was “as originally filed” or “as amended”, and whether or not the Romeny’s participated in any IRS amnesty programs?


    1. On the MSNBC “Ed Show” Friday evening a tax expert noted that the PWC letter refers to taxes “owed” in each year, not “paid.” He wondered whether this was because the Romney’s were audited and had to pay later as a result. He said he sent an inquiry to the Romney campaign and received a non-answer as a reply.

  2. It is interesting that Romney is being fillet for his income taxes. Now all Romney did is have his income taxes filled our to meet the requirement of the laws that he had nothing to do with. Unless someone (and the IRS would know) can show where he committed a crime in the way his taxes were filled out then his taxes should not be an issue. But the democrats are trying to stir CLASS HATE. The democrats were (Senator Obama included) involved in passing the law that Romney used (also democrats such as Buffett used). Many democrats keep saying that the rich need to pay more taxes but do you find where these democrats including Obama voluntarily paid additional taxes? NO! So one can gather that they are using this ONLY as a political attack. If they had been voluntarily been paying at a higher rate than the “tax law” required it would be a different story. What the democrats like to do is be generous as long as it is with someone else’s money.
    But the US will have to go through what Europe is now going though before the system changes. This will become more true as the number of voters that receive unearned government entitlements and will be easily able to out vote those who do pay federal income taxes when many of the more liberal view will also vote with them (to “earn” their votes) and be able to tax the producers and give to the non-producers so that they can receive their unearnd entitlements. An unearned entitlement is one that is not the result of work performed such as welfare. Social security, retirement and the first 13 weeks of unemployment insurance ARE NOT UNEARNED entitlements but extended is.

      1. It’s easy. All you need is an average 40-50% rate of return. Sure, that requires controlling the valuation of items placed in the IRA, and using offshore entities to avoid unfavorable rules about leveraging your IRA capital, and an uncanny ability to know when to cash out risky investments. But anyone can do that.

      1. Snark about capitalization aside, it really is a bit special that in the week when Mitt spun this absurd yarn about people who don’t pay income tax (nearly all of whom fall in one of three groups: students who will later pay income tax, retirees who’ve paid lots of income tax, and working folk scraping by and paying more in payroll taxes than Mitt pays overall, proportionally), and wrote that 47% off as being parasites obligated to vote Obama (though demographic and geographic distributions suggest Romney’s getting about half their votes), and Obama replied by stressing that he’s the President of all Americans – in this situation, which I’ve admittedly described in my trademarked long-winded manner, the line being followed by Curly and his ilk is that the Democrats are trying to stir up “CLASS HATE” and divide the electorate.

  3. “…involved in passing the law that Romney used…” Uh-huh. Nobody who “uses” those laws ever has committed tax fraud – right? I’m not saying Romney has – but absent the evidence it’s an error to declare that he has not. The returns might also reveal that, for tax purposes, he declared his residence to be other than he declared it to be for political purposes. They might show he received significant compensation as an executive of Bain Capital when he claims he no longer had a meaningful role in Bain Capital.

    But let’s take Romney’s word for it: revealing his tax returns would give the Obama campaign ammunition. By that he seems to mean that in using the returns (if they were released) the Obama campaign would not be firing blanks. The returns contain material that can be used against Romney by political adversaries. Romney says so.

    Do note the difference between “use” and “misuse.” I must confess that Republicans seem to be largely unaware of that difference: they misuse a lot of the time and pretend they use.

  4. Romney still paid about $1,900,000.00 more in federal taxes than you did, James, and receives the same amount of government benefits as you do.

    When is the media going to address the REAL issues? If you do not think a national debt of over $16,000,000,000,000.00 is a large number, just try entering into you pocket calculator. Every time the media shouts “Look! A squirrel!” the public goes chasing after another useless diversion.

    1. = = = and receives the same amount of government benefits as you do. = = =

      Mr. Romney and Bain Capital made extensive use of the Federal bankruptcy courts and the Pension Benefit Guarantee Corporation, among many many other government services and societal infrastructure they took advantage of. I don’t know about you, but in my personal family finances (nor my business dealings) I have never dumped a pension plan on the PBGC.


      1. Right. The Romney fortune could not have been built without the massive financial and legal framework that exists in the US, without access to investors whose own wealth depends on those things, without goverment to enforce Bain’s contracts, without capital markets, without, more broadly, a prosperous society that made his financial success possible (not to mention Poppa).

    2. As I said on the other thread, one of the government’s primary purposes is to protect people’s property, and that benefits Mitt Romney a lot more than it benefits me, because he has a lot more property.

      But anyway, isn’t James Wimberley a UK citizen living in Spain? The ad hominem against him seems really ill-placed.

    3. Romney pays more US income tax than I do but receives more benefits than me. I am not a US citizen but British, and not a US taxpayer but Spanish. My average Spanish income tax rate is 30%.

    4. This is a Republican canard. Look, Romney paid so much more in taxes than some poor dude with only $12 in his bank account! What a noble fellow, helping out our country like that!


      The hallmark of an ethical society is a progressive tax structure that does not tax a starving person at the same rate as an insanely wealthy person, because the starving person needs their money to buy 69¢ Top Ramen for their kids. The wealthy person can use their untaxed dollars for all kinds of frivolous crap, like $600,000 dressage horse, and sixth houses, and third Cadillacs. Most people are not even asking for a heavily-skewed progressive tax structure, just one that doesn’t allow Mitt Romney to pay less than half what a family making 1/100th of his income does. To any person with a sense of the just, this should be clear.

      On your second point. This number is a red herring used by the far right to send people into a panic. Yes, we have a national debt. But we cannot, in order to reduce this debt, send our country into a death spiral where we allow numerous Americans to starve, to become gravely sick, our infrastructure to fail, etc. The Democrats have a plan for dealing with this debt that would actually work, involving a mix of spending cuts and taxes. The Republicans, as far as I can tell, have bubkes–either they propose predatory economic warfare on the poor and sick, or they propose vague platitudes and Tea Party Hallmark cards that mean nothing. Romney has opted for the latter; his running mate the former.

      1. Indeed. Also, the wealthy person can look at a big chunk of income and decide that rather than paying taxes on that money they’d rather dedicate it to the charitable (or “charitable”) endeavor of their choice.

        Needless to say, if all of your income is earmarked to living expenses and a modest safety cushion, none of these are options for you.

        Beyond whether the working class can afford such decisions, even when they (proportionally) can afford it, they probably don’t get a tax deduction. If you’re not making enough money that itemizing donations makes sense – and this group encompasses a huge proportion of working Americans – you can’t deduct charitable contributions. Mitt pays 10% or more of his income in church fees, and deducts it from his taxable income. If he were a single guy making $30,000 and paying 10% in church fees, he likely couldn’t do the same – accumulating $6K in deductable expenses to beat the standard deduction is a lot easier on $20 million than it is on $30K.

    5. Jeff,

      Speaking of “Look! A squirrel!”, your fear-mongering about the $16T — oooooooh look at all those zeros! — is an excellent illustration of the technique. What about the $14 1/2 Trillion or so in GDP last year? A little perspective, maybe? It’s hardly irresponsible for people to borrow 2 or 3 times their annual income to buy a house which they pay off in 30 years. And the U.S. Government has an indefinite time-horizon, not a predictable 40 year working-lifetime.

      1. Not to mention most of the debt comes from gratuitously waged unwinnable wars, which the far right would happily extend into at least three additional countries/arenas (if you take their word for it as expressed in this election year, which should be pretty convincing, given that they have every electoral reason to lie about their unpopular thirst for war).

  5. It sounds like the “effective personal income tax rate” only reflects what’s on Mitt’s IRS Form 1040. But that leaves a lot unanswered. For instance, does the “effective personal income tax rate” include income and deductions reported on IRS Form 1041 for trusts of which he is a beneficiary? It doesn’t sound like it. Does the “effective personal income tax rate” include income and deductions reported on tax returns for the family limited partnerships he undoubtedly holds interests in? Probably not.

    In 2009, did Romney restate his prior year tax returns and restructure his taxes so that he would have larger numbers for his “effective personal income tax rate” on his Form 1040? Perhaps.

    The only way to really answer these questions is to release the returns. All of them. The PwC letter is carefully evasive horse manure.

    1. The PWC letter says they calculated the effective tax rate in the specific manner requested by Mitt Romney — This may or may not imply that PWC believes that this calculation ins misleading, but it does disown responsibility for the choice of measure.

      1. So somebody did a first pass to figure out the best way to structure the request, and the Romney campaign subsequently asked PWC to do it that way.

    2. The PWC letter says they calculated the effective tax rate in the specific manner requested by Mitt Romney — This may or may not imply that PWC believes that this calculation ins misleading, but it does disown responsibility for the choice of measure.

      1. Well, maybe.

        The letter was written at Romney’s request, but surely there was discussion of its content, including the calculations, ahead of time. It’s hardly implausible that PWC offered Romney some advice as to which numbers would look better or worse, which years might be included, and so on.

        I’m dubious that Romney specified all that without some help from PWC. Still, I do concede that the final choice was his. And he chose deception, to no one’s surprise.

    3. The effective tax rate is on Mitt’s reported taxable income. It is therefore effectively meaningless: any schemes he engaged in to hide, shield, oddly structure, or otherwise exempt income from taxation aren’t considered. Any idiot could have looked at the capital gains tax rate in each of the last twenty years and gotten within the ballpark of knowing what rate Mitt paid on his reported taxable income. It’s a joke.

      Case in point: in January of this year, in his “Preliminary 2011 return”, Romney reported that in 2011 he’d made roughly $20.9 million. Now, in September, he’s reporting that in 2011 he made roughly $13.7 million. Sometime in the last eight months, Romney retroactively lost $7 million (a third of his income) in 2011. Retroactively. How does that even work? And when his income numbers are that fluid, and that subject to manipulation, what does knowing his self-reported effective tax rate even tell us?

      1. My guess is that Romney’s 2009 return and probably 2008 show far higher percentage tax rates than other years, and they structured the letter on purpose to hide that fact.

        The 2010 return has a carryover capital loss from 2009. He therefore paid no capital gains in 2009, probably from the market also tanking in 2008. So in 2009 and probably 2008 he just had moderately-wealthy level of ordinary income taxed at the higher ordinary rates, probably in the five-figure to six-figure range despite having assets worth $250 million. Revealing annual tax rates would show this too clearly, and show how little taxes are paid by a fantastically wealthy man. So he won’t do it.

        1. Things like this make me wonder whether there is any effective, just way to have a wealth tax (without a bunch of police-state Wealth Assessors excessively peering in your cupboards and spreadsheets). I’m dubious of whether such can be fairly administered – but if it could be, I’d be very interested in it.

          1. Estate taxes and property taxes are wealth taxes. Transaction taxes on equities could also be pretty effective wealth taxes.

            There would be some cheating but I don’t see a huge difference from income tax cheating. My personal preference would to increase the estate tax and lower the income tax. It might actually be harder to cheat on estate taxes because too many eyes are involved.

          2. Not estate taxes. Corporations never die, and rich people die and give their money to foundations that do little more than enforce the rich person’s desires.

            In any case, You’d need an absurd level of estate taxation assuming you exempt the first half-million dollars or so (more likely at least a million), and you’d really have to do that just to take care of the house, family treasures, and a modest legacy.

  6. The thing that immediately struck me upon reading the letter (as well as the original press release) is that while it notes that Romney does not owe any outstanding taxes currently, it does not say whether he never did; in particular, the statements in the letter are consistent with the popular hypothesis that he availed himself of the 2009 IRS special tax amnesty program. Overall, the letter raises more questions than it answers and invites speculation.

    At this moment I am wondering who in Romney’s campaign thought it was a good idea to make his taxes the subject of public debate again. Even if it doesn’t harm him in the end, it is a squandered opportunity for Romney to shift news coverage to something more advantageous to him.

    For what it’s worth, I don’t really care about the tax returns of presidential candidates (I don’t think my vote was ever influenced by one and I consider them mostly news cycle fodder). I’m talking about the campaign strategy fail that this decision was.

    1. I think it makes sense for Romney to make his taxes the subject of public debate again; it’s probably a better issue for him than his remarks on the alleged 47%.

      I just wonder what he’ll be trying to distract us from when his campaign decides it’s a good idea to revisit the 47%.

      1. My dad was a campaign manager for many years. He’s surely spinning in his grave over this tactical error at the top of his party. If you are changing the subject to another losing subject, you are desperate and flailing & how did you get in such a position?!?!

    2. I think the idea was to give this the traditional Friday dump and then by Monday respond to all tax questions with “We released the data, asked and answered, next question.”

      Hiding Ryan’s unreported income problem in the noise doesn’t hurt either.

  7. James is correct to point out that the averaging method used by PWC is inherently deceptive, but maybe it’s not totally useless.

    Bear in mind is that until 2003 dividends were taxed as ordinary income, and capital gains at 20%, rather than 15%, so Romney’s rate would necessarily have been higher than it is now. So for those thirteen years, the least Romney could have paid as a percentage of his AGI was 20%, and that would have required that his only income be capital gains. (That’s probably one reason, BTW, PWC included those years). A little arithmetic suggests that his average rate prior to 2003 was likely in the low 20’s, not much more than that minimum.

    Some other things:

    1. AGI excludes any IRA contributions or income. So given his massive IRA’s the rates are much lower than they appear as a percentage of actual total income. Yes, that’s true for everyone with an IRA, but there aren’t many $100 million IRA’s running around.

    2.The trustee writes that, “During the 20-year period covered by the PWC letter, Gov. and Mrs. Romney paid 100 percent of the taxes that they owed.” He doesn’t say they paid 100% of what they owed every single year. That leaves open the possibility that Romney did evade taxes on his Swiss account, and then take advantage of the amnesty.

    3. The horse seems to have disappeared. Wonder why?

    1. Thanks for the 2003 rate change datum.
      “A little arithmetic suggests that his average rate prior to 2003 was likely in the low 20′s, not much more than that minimum.” We still need to make it average out unweighted at 20% over the 20 years. Suppose the last 6 years (2004-2009) were at an embarrassing 9%; 13% is not worth concealing, as the Romneys have revealed that anyway for 2010-11. You would need 14 years (1990-2003) at 24.7%. This looks plausible.

      1. Even more plausible is that Romney took few or no capital gains in some year, and thus paid a relatively high rate, 30% or more, on a small (by his standards) income. That would raise the “average effective rate,” dispropotionately. Of course that’s the problem you point out in the post.

      2. Digging deeper into history, I now recall that through 1997 the rate on capital gains was 28% .

        Another reason to average 20 years rather than 10.

  8. “As prepared.” Could easily mean, “The person who prepared these returns for Mitt played fast and loose with the code, but as prepared, we certify that . . . ”

    Also, there’s an effort afoot to say that Mitt Romney was trying to say that the 47% ARE victims, and he wants to save them.

    That is CLEARLY NOT what Romney said, or meant to say. He said, and meant, the exact opposite. Mitt said that 47% of Americans THOUGHT of themselves as victims who deserved — were entitled to — food, shelter, you name it.

    Mitt: “There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. … My job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”

    Senate candidate Kelly Ayotte (R) of New Hampshire is one who is pushing this ‘Mitt meant that they ARE victims whom he will save.’ thing.

  9. You know what the worst part of all this is? We’ll never, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever, ever know.

    If Romney wins the election–we’ll never know. We’ll probably get to see his next four-to-eight years of returns, custom-tailored to whatever percentage he has deemed electorally appropriate to pay. But he’ll never let us see the ones he filed when he knew nobody was looking.

    If Romney loses the election, further inquiries on the subject will be transferred to an overseas call center where the only English word they know is “no.”

    Obama, win or lose, will never allow even a hint of a possibility of an audit. That’s just not done in politics, auditing your rival. Romney could submit his 2012 taxes to Obama’s IRS claiming he’d made $18,000 as a Wal-Mart greeter, and he wouldn’t get audited. So there’s no chance of any of this coming out in a trial transcript somewhere.

    There might be some rogue IRS employees claiming they’ve got the dirt on Romney at some point. But there will be a good chance that they’re lying. The IRS has gotten burned by employees snooping celebrity returns in the past, and they’ve got safeguards against that now.

    Beyond that, these things stay private forever. No FOIA, no sunset, no imaginable civil discovery. It’s not even like the census, where if you can wait 70 years you can finally see some of it.

    Your only chance of seeing Romney’s tax information is to become his personal tax attorney. Or wait for him to apply to you for a home or car loan.

    There are great mysteries out there. What happened to the Roanoake Colony? Are there extraterrestrial intelligences? Does P=NP? We may get answers to those. Romney’s taxes are utterly beyond human ken, though.

    1. And, honestly, I don’t care. I’m not really all that happy that we require presidential candidates to bare their souls and let us look into their personal lives. The information that we get nowadays is nothing that has been shown to be a good predictor for presidential competency. I don’t want to vote based on a politician’s image, but on their policies. Most of the stuff we’re talking about seems to exist merely to keep the news channels happy, which need something to talk about for their 24/7 infotainment.

    2. Big picture, after the election I won’t much care about Mitt’s taxes as an individual case, especially not if he loses. But as so often here, the scandal is what’s legal: that Mitt should be anywhere from 9% to 13%, entirely at his discretion, on an income number that in any case is heavily massaged by tax shelters, structuring, and the like, while a typical school teacher pays two or even three times as much in combined federal income and payroll taxes on their far more meager income – that’s a scandal. Or should be.

      And that’s leaving aside the question of the Tax Amnesty.

    3. If he loses, who cares about his taxes. He’ll retreat back into is money or his vast carelessness, or whatever it was that kept him together, and let other people clean up the mess he made of his campaign and the GOP generally.

      If he wins, again, who cares. We’ll be so apocalyptically screwed by having a pushover president and the most insane right wing Congress we’ve ever had, that his tax rate won’t matter.

      Either way, his tax rate only matters as a current campaign issue (and of course a legal matter–is he cheating America out of millions it’s owed, or not?)

  10. i think romney released his taxes to show he paid more that the 47% who paid no income taxes. it was just a talking point that romney hoped would change the debate from his elitism expressed to rich donors instead to show an ethic of productivity and generosity to the voters. it doesn’t look like it worked yet.

  11. I read another article where the thought of what he is hiding might be related to the location of his address when he ran for governor of Massachusetts; was perhaps in Utah?

    1. No, whatever he’s hiding, it’s not that, because that’s not hidden. Yes, when he ran for Governor of Massachusetts it was discovered he’d been filing taxes as a resident of Utah (and thereby avoiding Massachusetts taxes), and so did not meet the qualifications to run for Governor of Massachusetts. But this isn’t buried in his missing federal tax returns: it’s a matter of public record. He blamed his accountant for the discrepancy and was permitted to pay the taxes he would have owed (really, quite a small amount) and retroactively restore his status as a Massachusetts resident. Big fan of retroactivity, that guy.

    2. The theory I heard was that the problem wasn’t when he was running for governor of Massachusetts — Warren is correct that they threw out the residency requirements in order to let him run for governor — but when he voted for Scott Brown in the January 2010 special election, after he sold his house in Belmont. He claimed that he was living in his son’s unfinished basement, which of course beggars belief, and his son’s neighbors say they hadn’t seen Mitt and Ann for a couple of years at the time. So he was probably committing vote fraud by voting in a state in which he no longer lived or owned a residence.

      See — I haven’t checked any of this out especially, but if you’re thinking of a story about an address kerfuffle this might be it.

  12. So you know I’ve been saying Mitt’s a sociopath or nearly so for a long time now. I’ve changed my mind, or added another notion that explains more of the behaviors we constantly see from him.

    He’s unaccountable. He’s unaccountable for anything, ever.

    – Getting elected is just another form of being the bigger boss; not that power flows from the people, or anything like that.
    – You don’t need to see what he has, just shut up and vote for him.
    – There are the Romneys, and then there are the Help.
    – No concern for what happens to thousands of workers when their companies are seized and sucked dry.
    – People aren’t even people; only corporations are people.
    – No, I don’t even know when my wife’s dancing horse is appearing in the Olympics.
    – Hey, where the hell did these ugly cookies come from?
    – Saying whatever the hell he thinks his audience in this five minutes wants to hear, in order to grab the $50,000 checks and get out, or the delegates or whatever the shiny object is that his lizard brain is on. GIVE me that! then run on to the next hoard, leaving an unaccountable mess behind.
    – Never apologize — double down, or obfuscate, or reverse position, but never apologize — that would indicate “accountability”.
    – I can’t be responsible for Loser America, even though I think that’s half of America. T
    – Those difficult issues? We’ll talk about them in quiet rooms.
    – My policies? I’ll tell you after the election.
    – Ann-i-matron: You people are just so lucky that someone of my husband’s caliber is even running.
    – I got mine, screw you. Now give me that damned presidency.

    Unaccountable. It’s the singlest, simplest, explanatory principle.

    1. Not only unaccountable, but like so many republicans he believes that money = success. The more money, the more successful and good you are. Therefore, the only evidence anyone needs that Romney would be good at ANYTHING is the total number in his bank account.

      It’s a philosophy of life that Ted Turner once summed up succinctly: “Life is a game, and money is how we keep score.”

        1. But God, that’s why I love England — where everything is not simply a matter of money. God bless England.

  13. The whole release smacks of deception. PWC announces some carefully chosen statistics, designed to make Romney look as good as possible. And despite this release of information, he refuses to release the actual returns which would allow the public to understand exactly what Romney did. There’s now even less question in my mind that his refusal to release the returns is because there’s something in there he doesn’t want anyone to know. And I doubt that what he’s hiding is simply percentages; so long as he paid his taxes lawfully, I don’t see anyone refusing to vote for him because his effective rate is low.

  14. I wonder what the Romney campaign was thinking when it decided to release the letter. The idea that Romney was hiding his effective tax rate was one of the relatively innocuous explanations for his failure to release his older tax returns, so it doesn’t make must sense to release a letter which rules that out.

    1. Good point. Whaever is concealed must be worse than what has nbeen revealerd. So do we really want all 22 veils to come off? Remember the dreadful fate of Rider Haggard’s semi-immortal heroine Ayesha in his High Victorian adventure romance She:

      True enough — I faint even as I write it in the living presence of that terrible recollection — she was shrivelling up; the golden snake that had encircled her gracious form slipped over her hips and to the ground; smaller and smaller she grew; her skin changed colour, and in place of the perfect whiteness of its lustre it turned dirty brown and yellow, like an piece of withered parchment. She felt at her head: the delicate hand was nothing but a claw now, a human talon like that of a badly-preserved Egyptian mummy, and then she seemed to realise what kind of change was passing over her, and she shrieked—ah, she shrieked!—she rolled upon the floor and shrieked!

      Smaller she grew, and smaller yet, till she was no larger than a monkey. Now the skin was puckered into a million wrinkles, and on the shapeless face was the stamp of unutterable age. I never saw anything like it; nobody ever saw anything like the frightful age that was graven on that fearful countenance, no bigger now than that of a two-months’ child, though the skull remained the same size, or nearly so, and let all men pray they never may, if they wish to keep their reason.

  15. Mark Kleiman :

    Despite the speculations and Romney’s obfuscations,
    I have settled our wager

    I originally proposed the bet as a means of keeping the questions about Romney’s tax compliance topical, and in solidarity with Majority Leader Reid’s unexpected chutzpah. Little did I expect that Romney himself would voluntarily feed the issue back into the news cycle during the waning months of the campaign.

    So although I paid, I’m feeling like a winner. Hope you do to.


    1. Good for you – though I’ll point out that your bet seems to be that Reid was lying, while what we now have is evidence that – at least to the satisfaction of someone at Price Waterhouse Coopers – the claim Reid made was incorrect. Reid could still be honestly and accurately describing what he was told by an plausibly informed insider in apparent good faith.

      Also note that, as I said above, all PWC is really telling us is that Romney paid (possibly eventually paid) the going rate on what they and he have defined as his taxable income. The tax rate paid on what Romney conceded to be his taxable income is really not interesting. The real question, not addressed by PWC, is how Romney structured his income to evade taxability, and whether at some point he hid overseas income from taxation.

      1. Thanks, Warren.

        I’m aware that the available evidence is not sufficient to falsify Reid’s claim. In fact, it looks very very much as if Romney put his accountants to work after Reid’s statement, and had them restate his eligible taxes, so that they could weasel-word their now-technically-true PWC-blessed claims.

        Someone else pointed out that the PWC statement seems to make a claim about the Romneys’ tax rate, averaged over years. Averaging percentages of unlike things does not yield a meaningful result, and so when we see people do so in argument, we should be alert.

        If I were to use this dodge, in one year I’d have my accountants re-claim or defer almost all income to other years, so that my taxable income was $500,000, and avoid taking most deductions, so I deliberately pay a fairly steep 25% for this one year — $125,000. The deferred income goes into the next year, and I employ every available deduction: my taxable income next year is a hundred times greater, $50,000,000; but in this second year, thanks to the tax code and the genius of accountancy, I pay in federal income taxes only 1% for the second year — $500,000. Averaging the tax rates for the two years, as the PWC statement seems to do, we come up with the truthlike claim that “my tax rate averaged 13.0%”, and I paid taxes every year — yet the total taxes I paid over two years, $625,000, are less than 1.3 % of my total income, $50,500,000, for those same two years.

        In Romney’s case, I’ve accepted that we’ll never know.
        But weasels use weasel-words for a reason.

        1. There’s another way Reid’s source could be right. Given Romney’s apparent ability to get double-digit returns on investment, it would absolutely make financial sense for him to pay nothing, drag out the compliance conferences and the audits and so forth for as many years as possible until the IRS started toward proceedings that could lead to court filings, then declare an innocent mistake and negotiate back down to original payment plus interest (with penalties waived because it would cost the IRS more to go to court and collect). He would essentially be borrowing money from the government at single-digit rates and investing a double-digit. I don’t know if you could stretch such cases all the way to 10 years, but I wouldn’t bet against it.

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