View Full Version : Reid Fires Back! Romney PwC Letter Meaningless!

Gayle in MD
09-22-2012, 08:40 AM
Mitt Romney PwC Letter Is Meaningless, Reid Fires Back

WASHINGTON -- Mitt Romney on Friday released a letter from his tax accountant, PricewaterhouseCoopers, promising that Romney paid an "average annual effective federal rate" of 20.2 percent over 20 years. The number is being released instead of the tax returns themselves, and is being used to rebuff Senate Majority Leader Harry Reid's charge that Romney didn't pay taxes over a 10-year period.

But it is a meaningless figure.

According to the letter from PwC avowing the number, it is based on Romney's adjusted gross income. That means that, for instance, if Romney made investment profit of $20 million, but had losses of, say, $19.9 million, his adjusted gross income would only be $100,000. Paying 20.2 percent of $100,000 would cost Romney just over $20,000.

If Reid's comment is interpreted strictly -- that Romney paid literally $0 in taxes over 10 years -- then the PwC letter undermines that charge. But if Romney paid only a very small amount -- say, $20,000 on $20 million -- it would be hard to award Reid many pinocchios for calling that nothing.

Such a low-payment scenario is considered quite plausible by tax experts, who noted that investors can pick which investments to realize each year to maximize their tax benefit. In a year such as 2008, when the global markets tanked, an investor would likely have more than enough losses to offset gains. Indeed, Romney's 2010 tax returns show a carryover capital loss credit, meaning he had more losses than he could use the year before.

In other words, without seeing Romney's actual return -- or at least without knowing what Romney declared as his adjusted gross income -- it's impossible to know if the rate he paid bears any relation to Romney's economic reality.

"His poor father must be so embarrassed about his son," Reid (D-Nev.) told HuffPost earlier this summer, in reference to George Romney's standard-setting decision to turn over 12 years of tax returns when he ran for president in the late 1960s.

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Reid said a Bain investor had told him that Romney paid no taxes over a decade

"Harry, he didn't pay any taxes for 10 years," Reid recounted the person as saying.

"He didn't pay taxes for 10 years! Now, do I know that that's true? Well, I'm not certain," said Reid. "But obviously he can't release those tax returns. How would it look?"

Romney's claimed rate is misleading in another way. 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," Galle said. "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."

The Washington Post's Greg Sargent identifies a third reason the average of 20.2 percent is meaningless. As the campaign told Sargent, it's an average of rates, rather than the simpler and more accurate calculation, which would divide his total earnings by his total taxes paid.

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. Williams provided the following purely hypothetical example:

“Let’s say you have 10 years in which you paid 13 percent in taxes, and 10 years in which you paid 27 percent,” Williams told me. “If you average those rates, you’ll get an overall rate of 20 percent. But if the 13 percent years were high income 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.”

Yet in that scenario, the Romney campaign would be claiming, by its chosen metric, to have paid 20 percent.

Reid has been quick to dismiss the PwC letter, calling for Romney to release the full returns and saying in a conference call with Nevada reporters that an "outline by some accountant about his blind trust, that’s not going to do it."



Go Harry!

09-22-2012, 08:51 AM
Ritt Momney is struggling with this issue. It appears he will never do anything that convinces his critics or skeptics on this issue. To show this scab, pick it a little, and then cover it back up is a very bad strategy in my view.

Gayle in MD
09-22-2012, 09:13 AM
"Mr. Fix it" has lost any semblance of being a man who can run anything at all!

The very sight of him blustering out critical reveiws of anyone else's management performance, let alone this president's, is beginning to look like a hilarious clip of an old cartoon!

Queen Ann is just as bad.

After the world ignored her demand to 'Stop It!' she was outraged, I tell ya!

Queen Ann doesn't like it when "You people" don't bow to her every request. She was enraged, I tell ya!

They had to land her plane!

Smoke was pouring out of her ears!



09-22-2012, 09:58 AM
Can anyone here on the left read at a fiifth grade level?

Anyone need a crayon?

09-22-2012, 11:37 AM
Reid has it exactly correct in his remarks.

Here's the take of a seasoned professional Republican campaign strategist, who actually worked several times in the past for Ritt Momney's various campaigns:

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Alex Castellanos, who worked for Mitt Romney in 2008 and continues to be a Republican political consultant, tells Politico's Maggie Haberman that he is not impressed with the optics of Romney's tax dump move:

"<span style='font-size: 14pt'>At first I thought this was an April Fool's Joke</span>," said Castellanos, who tweeted something to that effect at me earlier. "But it isn't April. I can't imagine that David Axelrod will now say, I'm glad Mitt put this issue behind him. This will drag Mitt's taxes back into the debate. And there's not many days left. <span style='font-size: 14pt'>I just can't imagine why they would do this. There are 40 days left and you have now made more of them about Mitt's taxes....you don't serve a life sentence and then confess afterward. They've taken their beating on this (already) ... I just don't understand how a (being) 'little pregnant' strategy (works)."
According to Haberman, Castellanos isn't alone. She says other Republican operatives are telling her this partial dump of Romney's past tax returns will only encourage more questions about his past returns.

One good question, raised by Greg Sargent, is this: what was Mitt Romney's actual effective tax rate during the past 20 years? As he points out, Romney merely released the average tax rate during that time. That means years in which he had lower income count the same as years in which he had a higher income, and given that his tax rate seems to go down as his income goes up, the 20 percent figure he's releasing is probably a bit misleading.</div></div>

Of course, understanding why Reid is correct requires knowledge of how the use of averages can be very misleading. A knowledge you have repeatedly displayed you lack.

Here's a baseball example I read somewhere that may make more sense to you.

Say a rookie major league baseball player makes a limited plate appearance in his rookie year, and goes 6 for 10 at bats with a base hit or better, for a .600 batting average that first year.

The next year he is more of a regular, and in a far larger number of tries, bats at a .250 clip.

"Averaging" the two years, he then claims he's a .425 hitter (on average). Sorta true, but highly misleading.