Why Romney Won't Release His Tax Returns

8/17/2012 03:21:00 PM
Ezra Klein has a strange article on Romney's recent claim that he paid more than 13% in taxes every year for the past ten years. Strange for a couple reasons. First, 13% is extremely low for a man of Romney's means, and well below the rate that the middle class has paid every year for the past ten years--yet Klein doesn't make any remarks on this.

But more importantly, Klein essentially argues that the claim is false because Romney had to have had a lower tax rate in 2009, because he had to have made a loss on investments that year. But where Klein goes wrong is in claiming that since Romney made no capital gains income that year--which is taxed at a much lower rate than the rest of his income--he must have paid an even lower tax rate. Huh?

Ok, it is possible that because of his large capital losses in 2009, Romney owed no income taxes. But that would also mean that Romney made no income that year--in fact, he lost money that year. (hypothetically, of course, since we won't know for sure without the tax returns). So if in fact this is what happened, I would rate Romney's 13% claim as "mostly true."

This scenario actually conjures up a fairly good reason why Romney won't release his returns, as well. Simply put, he doesn't want to disclose embarrassing losses in 2009--indeed it could be that he's had losses every year since the economy went sour in 2007, which would make him look like a reckless businessman.

Indeed, this could give some credence to Harry Reid's claim that Romney has paid zero taxes for some time--if Romney has several straight years of large losses, he may not have owed any taxes. And this would still be consistent with Romney's claim that he's paid at least 13% of his income in taxes.