INCLINE VILLAGE, Nev. — It's actually pretty funny to hear buffoons like Harry Reid pontificate about accounting and tax matters. Indeed, Harry got his shorts in a wad, the other day, when the Romneys published their 2011 Federal income tax return for all to see. Quoth Harry Reid, a true joke himself: “The information released today reveals that Mitt Romney manipulated one of the only two years of tax returns he's seen fit to show the American people ... It's also galling to see the creative accounting Mitt Romney applied to his own tax returns ... Once again, we see Mitt Romney is out of touch with middle class families, who don't have the luxury of accounting wizards and foreign tax shelters...”
First of all, Har, what makes you such an expert on matters of accounting, creative or otherwise, considering you and your Senate cronies haven't even been able to come up with a budget over the course of the recent several years? And where are your tax returns, Har? Or have we somehow missed their publication? And when did it become illegal to invest in entities which conduct business in foreign jurisdictions — Switzerland, Cayman Islands or otherwise? We guess we just missed that law too.
Our suggestion to Harry: Do your job, for a change, lest your continual blathering remove all doubt as to caliber of your intellect.
Which reminds us — how many news reports did you see about that 14.1 percent tax rate which the Romneys paid? Another example of simple ignorance (What else can you call it?) on the part of the run-of-the-mill press reporters out there.
While it is true that the Romneys' total Federal tax liability was 14.1 percent of their “adjusted gross income,” (AGI) professionals regard the correct measure of the effective tax rate as the tax liability divided not by AGI, but by taxable income (TI), which considers a taxpayer's itemized deductions for things like … charitable contributions (about $2.3 million in the Romney case), state and local income taxes (about $1.3 million in the Romney case) and various other deductions.
Taxable income might be more loosely described as not how much you made, but how much you kept for yourself. Using TI as the measure of the Romneys' effective tax rate, one comes up with 21.5 percent, which tells us that the generic (hostile to Republican) press dolt, out there, only missed the more correct measure of the tax rate by about 50 percent. Not to mention, of course, that when taking into account the state and local income taxes paid by the Romneys, the effective tax rate is more like 36.2 percent.
You didn't hear that rate revealed by any of those press clowns, now did you.
But that's OK — we guess they were just engaging in a bit of “creative accounting.”
— CONSULT YOUR TAX ADVISOR - This article contains information about various tax matters. You should consult your CPA regarding the implications to your own particular situation. Jeff Quinn, the author of this article, is a shareholder of Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno. He can be reached at 831-7288, welcomes comments at firstname.lastname@example.org, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.