PolitiFact knocks Harry Reid’s tax charge against Romney
During a public appearence yesterday in his home state, Senate Majority Leader Harry Reid (D-NV) was pressed by reporters on his unsubstaniated charge that Mitt Romney hasn’t paid his taxes in 10 years.
According to the Las Vegas Review-Journal, Reid didn’t back down from his claim, for which he has absolutely no evidence. Reid once again said that Romney could put it to rest by producing more tax returns. Reporters kept after Reid on the charge, prompting him to snap, saying, “I’ve answered your question.”
He received some backing from ex-House Speaker Nancy Pelosi (D-CA), who told the Huffington Post that because “[s]omebody told [Reid]” that Romney hadn’t paid his taxes that “Harry Reid made a statement that is true.”
On what planet that makes sense is anybody’s guess, but others aren’t so convinced. For example, PolitiFact reviewed the charge and weighed the likelihood that someone earning as much as Romney, and gave Reid their worst rating — “Pants on Fire”:
On Aug. 6, a Reid spokesman confirmed to PolitiFact that the majority leader still maintains the information came from the anonymous Bain investor. Our Truth-O-Meter guidelines say we hold officials accountable to back up their words. By those standards, Reid has not proven his allegation.
Still, we wondered how likely it was that Romney didn’t pay taxes for 10 years.
In an Internal Revenue Service study of nearly 4 million 2009 tax returns of filers reporting more than $200,000 in adjusted gross income, 20,752 of these taxpayers — or just 0.529 percent — had no U.S. income tax liability. About half of those did have income tax liability in other countries.
But Romney’s recent income has been substantially higher than $200,000, meaning that the size of his deductions and credits would need to be even larger than for many of those included in this IRS study if his tax liability was going to fall to zero. According to the one full return he’s released, for tax year 2010, he and his wife Ann reported an adjusted gross income of $21.6 million and paid taxes of about $3 million. He’s also released an estimate of his 2011 taxes, which showed income of $20.9 million and a tax payment of $3.2 million.
To gauge tax patterns for even higher-income earners, the best we can do is to look at another IRS study detailing the taxes paid by the top 400 earners in the nation in 2008. To make this list, you would have to have earned roughly $109 million that year. Among those 400 top taxpayers, 30 — or 7.5 percent — had an effective tax rate of between 0 and 10 percent. Given how the statistics are calculated, it’s impossible to know how many paid no taxes, but it’s safe to assume it’s well below 7.5 percent.
Neither study directly addresses Romney’s situation — he falls somewhere in the middle of the two studies — but the data does show that for earners both below and above him, it’s unlikely they paid zero taxes for one year, and it’s even more far-fetched to think they did so for 10 years.
Salon.com — which is generally considered a liberal media outlet, thus no friend to Romney — asked two tax experts whether they thought it was likely that Romney paid no taxes for 10 years. They concluded, “probably not.”
The article quoted David Miller, a tax attorney with the firm Cadwalader, Wickersham & Taft in New York, saying it’s “highly unlikely” that he paid nothing.
“It would be easier for someone like Steve Jobs to pay zero, as most of his wealth was in company stock, which isn’t taxed until sold and may never be sold,” Miller told Salon. The Salon article continued, “But Romney’s arrangement with Bain is different. He would have earned management fees, and when Bain sold the underlying companies that it invested in, Romney would have been subject to tax on his share. ‘It’s possible he paid very little in taxes, but I find it hard to believe that he paid none,’ Miller said.”
Salon also quoted Joshua Kamerman, a lawyer and CPA in New York, who said while it’s theoretically possible, it’s also “preposterous.”
Indeed, it doesn’t make much sense. Even White House Press Secretary Jay Carney tried to distance President Obama from Reid’s odd crusade yesterday; though one has to wonder if Reid would be pursuing the accusation if Team Obama told him to knock it off.
Reid’s accusations are unquestionably below the belt and, as George Will explained this weekend, a form of “McCarthyism.” If Romney does skate by unscatched on Reid’s charge, there is little doubt that the accusation will come up again at some point in the future. Not to mention that a Gallup poll last month showed that a majority of Americans want Romney to release more tax returns.
We should be talking about other thing, such as the economy and tax reform. And while no one wants to bend to a clown like Harry Reid, but this is going to continue to serve as a distraction in both the short and long-term unless Romney discloses more information.