September 23rd, 2012

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 they 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?

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