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.

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."

UPDATE: 9/23/12 3:13 p.m. -- David Cay Johnston flags a fourth element of the PwC letter that makes it meaningless. The tax preparers specifically and repeatedly use the term "owed" rather than "paid," leaving open the possibility that Romney owed taxes for certain years but did not pay them until later years, perhaps after an audit. The letter adds that it is "unaware" of any unpaid balances at this point. (Romney has previously acknowledged that he has been audited.)

"Each year during the period there were federal and state income taxes owed," the letter reads.

Here's Johnston on MSNBC:

The word "owed" is important because it suggests that there was an audit that resulted in a large payment of tax later because they underpaid the tax, an amended tax return by the Romney's, or an obligation that they didn't pay for some number of years.

So I wrote the campaign and asked them, and they know this statement is going to be very closely scrutinized. And this is afterall a verb. Why didn't they say "paid?"

The short answer that I got back was: "Not answering that question."

The Romney campaign didn't immediately respond to a request to elaborate.

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  • King Tut's Penis

    Seriously, we know more about a 3,300-year-old teen pharaoh mummy penis than we do about what lies carefully preserved in Romney's tax returns before 2010. That's either because we <a href="http://www.newscientist.com/blogs/culturelab/2010/06/on-the-trail-of-tutankhamens-penis.html" target="_hplink">know a fair amount about King Tut's mummified member</a> -- like the fact that it broke off and went missing for a while -- or because we know absolutely nothing about the pre-2010 presidential candidate's tax returns.

  • Coca-Cola's Secret Formula

    Despite the presence of a number of <a href="http://en.wikipedia.org/wiki/Coca-Cola_formula#Purported_secret_recipes" target="_hplink">purported recipes</a> for Coca-Cola, the company has long maintained that there is only a single copy of the actual formula, kept stashed away in a safe place. Last year, however, Coke <a href="http://www.thecoca-colacompany.com/dynamic/press_center/2011/12/coca-cola-secret-formula-moves-to-the-world-of-coca-cola.html" target="_hplink">moved its secret formula</a> to a vault housed at the World of Coca-Cola in Atlanta. Sure, it was only a token step toward disclosure -- and probably more about making money -- but at least it was something. Your move, Mr. Romney.

  • The Bermuda Triangle

    This region may be great for <a href="http://www.vanityfair.com/politics/2012/08/investigating-mitt-romney-offshore-accounts" target="_hplink">stashing tons of Romney's money</a>, but it isn't some sort of <a href="http://en.wikipedia.org/wiki/Bermuda_Triangle" target="_hplink">isosceles zone</a> of supernatural trickery. Detailed reports of notorious shipwrecks in this area have led most experts to conclude they were caused by bad weather, rogue waves or simply human error.

  • How To Speak Prairie Dog

    <a href="http://www.youtube.com/watch?v=y1kXCh496U0" target="_hplink">Those noises</a> might sound like just a bunch of annoying, high-pitched chirps, but <a href="http://news.bbc.co.uk/earth/hi/earth_news/newsid_8493000/8493089.stm" target="_hplink">Professor Con Slobodchikoff of Northern Arizona University has more discerning ears than you</a> -- and probably a cooler name, too. Slobodchikoff says the language of the prairie dog is the most complex of any animal decoded so far. The varmints (which Romney <a href="http://www.youtube.com/watch?v=w-iRlBH3G6A" target="_hplink">may or may not enjoy hunting</a>) even have different calls for different predators. According to Slobodchikoff's studies, prairie dogs can alter their pitch and frequency to specify the size and distance of whatever is approaching.

  • Donald Trump's Mystery Hair

    Trump and Romney might have a lot of things in common -- their mutual <a href="http://abcnews.go.com/blogs/politics/2011/04/since-president-obama-released-his-birth-certificate-will-donald-trump-release-his-tax-returns/" target="_hplink">fear of releasing tax returns</a> comes to mind. But when it comes to coiffure, they are worlds apart. There have long been questions about Trump's hair. Mainly, "What is that thing on Donald Trump's head?" Well, according to him, it's just hair, carefully manicured and positioned every morning so as to make sure that no mortal can ever catch a glimpse of his forehead. From what we know, there's actually only been <a href="http://www.youtube.com/watch?v=ezz1BkuE1Qg" target="_hplink">one known sighting</a> of that part of his body. Here's what Trump <a href="http://www.rollingstone.com/culture/news/donald-trump-lets-his-hair-down-20110511" target="_hplink">told <em>Rolling Stone</em></a> about his hair: <blockquote>"OK, what I do is, wash it with Head and Shoulders. I don't dry it, though. I let it dry by itself. It takes about an hour. Then I read papers and things. This morning I read in the <em>New York Post</em> ... I also watch TV. I love Fox, I like Morning Joe, I like that the Today show did a beautiful piece on me yesterday -- I mean, relatively speaking. OK, so I've done all that. I then comb my hair. Yes, I do use a comb ... Do I comb it forward? No, I don't comb it forward ... I actually don't have a bad hairline. When you think about it, it's not bad. I mean, I get a lot of credit for comb-overs. But it's not really a comb-over. It's sort of a little bit forward and back. I've combed it the same way for years. Same thing, every time."</blockquote>

  • Area 51

    Like Mitt Romney's tax returns, this Nevada military base is shrouded in a thick veil of secrecy. While there is undoubtedly a lot of stuff going on in there -- most of it likely far more interesting than Romney's tax history -- Americans aren't completely in the dark about the base. Since acknowledging the existence of the Air Force base, the government has predictably been hush-hush about projects at the facility. Historians have, however, have <a href="http://books.google.com/books/about/Shadow_Flights.html?id=cmMBAAAACAAJhttp://books.google.com/books/about/Shadow_Flights.html?id=cmMBAAAACAAJ" target="_hplink">written books</a> about Area 51's less juicy past. No aliens or UFOs, just some <a href="http://www.latimes.com/entertainment/la-mag-april052009-backstory,0,5104077.story" target="_hplink">advanced flight technology</a> and military procedures that have gone awry at times. But that doesn't rule out the possibility that there's a lot more going on there now. Alien spacecraft? Energy weapons? A time travel project? Your imagination's the limit. In a way, the government's approach to releasing information about Area 51 seems a lot like Romney's strategy for releasing his tax returns. Release a few boring details -- like your 2010 and 2011 forms -- only to keep everything else, presumably the most interesting stuff -- under wraps. When people ask what's going on back there, just tell them to pipe down and mind their own business. As with Area 51, Romney's method is proving an awful way to quiet speculation.

  • What Space Smells Like

    Do Mitt Romney's tax returns smell like "seared steak, hot metal and welding fumes"? If they did, they'd smell just like <a href="http://www.huffingtonpost.com/2012/07/22/what-does-space-smell-like_n_1691642.html" target="_hplink">space</a>, according to astronaut spacewalk veterans.

  • The God Particle

    <a href="http://www.huffingtonpost.com/2012/07/03/higgs-boson-explained-god-particle_n_1645732.html" target="_hplink">The God particle</a>. <a href="http://en.wikipedia.org/wiki/Higgs_boson" target="_hplink">The Higgs boson</a>. You say "potato," I say "potah ... Whaaa, come again?" To make a very long and nerdy story over-simplistically short, a bunch of really smart theoretical physicists have used a multi-billion dollar piece of equipment to prove the existence of the particle that gives mass to other elementary particles. They did this by blasting things at each other at near-light speed around a 17-mile tube track of death (or life?) located in a subterranean bunker in Europe. Is it possible that a mini hadron collider is listed as an expense on Romney's tax returns?

  • Why Sloths Are Bad At Balance And Stuff

    If the captains of the animal kingdom were picking species to partake in what Mitt Romney might call "sport," three-toed sloths might get picked dead-last -- unless that sport somehow hinged entirely upon being incredibly cute. Not only are these sloths lethargic, but they're clumsy, which is actually not a problem because they pretty much only come down from trees to poop. Because their slow-motion lifestyles afford them the luxury of being able to survive without a good sense of balance, the semi-circular ear canals that control their equilibrium <a href="http://www.huffingtonpost.com/2012/08/01/sloth-balance-bradypus-variegatus_n_1728811.html" target="_hplink">have never been honed by the evolutionary process</a>.

  • What Dinosaur Sex Looked Like

    So <em>that's</em> what it looked like, at least according to <a href="http://www.huffingtonpost.com/2012/07/09/dinosaur-sex_n_1659391.html" target="_hplink">Beverly Halstead, an Englishman </a>known for his candid talk about dinosaur mating before his death in 1991. Figuring out the "cloacal kiss" based on fossils from the Cretaceous Period must have been difficult. But it was still easier than guessing what Romney's tax returns might look like.

  • How To Survive The Zombie Apocalypse

    While <a href="http://www.huffingtonpost.com/2012/06/01/cdc-denies-zombies-existence_n_1562141.html" target="_hplink">they tell us</a> zombies aren't real ... <em>yet</em> ... that doesn't mean people aren't preparing like there's a brain-starved horde headed straight for their front door. Countless books, movies, TV shows, comics and websites provide entertainment and ideas about the best way to make it through Apocalypse Z without becoming a zombie. The Centers for Disease Control and Prevention has <a href="http://www.cdc.gov/phpr/zombies.htm" target="_hplink">hopped on board as a joke</a>, but the government's <a href="http://blogs.cdc.gov/publichealthmatters/2011/05/preparedness-101-zombie-apocalypse/" target="_hplink">preparedness guide</a> appears to be taking it pretty seriously. Too bad the CDC is only serving up a barebones list of recommendations. Wait, why do we care about a presidential wannabe's tax returns again? I'm going to draw up a contingency plan.

  • What Ryan Lochte's Mom Knows About His Sex Life

    Ike Lochte seems to know too much about her swimmer son's "<a href="http://www.huffingtonpost.com/2012/08/02/ike-lochte-ryans-mom-talks-one-night-stands-single-girlfriend-today-show_n_1733433.html" target="_hplink">one-night stands</a>." Way too much. Like "the opposite of how much we know about Romney's tax returns" too much.

  • Mitt Romney's Car Elevator

    Romney reportedly shelled out $55,000 to install a top-of-the-line "Phantom Park" car elevator in his California beachfront mansion, which will allow him to "<a href="http://abcnews.go.com/blogs/politics/2012/05/mitt-romney-ordered-55000-phantom-park-car-elevator-designer-says/" target="_hplink">maintain a hands-on relationship</a> with his machines," according to the maker. Sounds kinky. Kinky enough to make me want to read more tax returns. Oh Romney -- you <em>tease</em>.

  • President Obama's Annoying Stoner Habit

    Barack Obama was a cheeky kid who refused to observe proper stoner decorum, but author David Maraniss writes in Obama's biography that he pretty much got away with it. Here's <a href="http://www.huffingtonpost.com/2012/05/25/obama-pot-smoking-details_n_1545904.html" target="_hplink">a passage that describes</a> the future president's behavior while a member of the "Choom Gang" at his Hawaii high school. <blockquote>"When a joint was making the rounds, he often elbowed his way in, out of turn, shouted 'Intercepted!' and took an extra hit."</blockquote> We also know a little bit about Romney's adolescence. Primarily that he was kind of <a href="http://www.washingtonpost.com/politics/mitt-romneys-prep-school-classmates-recall-pranks-but-also-troubling-incidents/2012/05/10/gIQA3WOKFU_story.html" target="_hplink">a jerk</a>. More tax returns might be able to prove to the nation that he's changed a lot since then, though it's hard to think that he isn't scared they'd actually do the opposite.

  • Magnets

    <a href="http://knowyourmeme.com/memes/fcking-magnets-how-do-they-work" target="_hplink">Sorry juggalos</a>, we're pretty sure the scientists <a href="http://en.wikipedia.org/wiki/Magnetism" target="_hplink">are right</a> about this one. It's all about the magnetic fields.

  • Easter Island's Moai

    These monoliths are frequently touted as some of earth's greatest mysteries. That's because people are lazy. Researchers actually know a lot about these gargantuan rock statues. National Geographic did a <a href="http://video.nationalgeographic.com/video/national-geographic-channel/full-episodes/explorer/ngc-easter-island-underworld/" target="_hplink">lengthy series</a> on the studies of ancient Easter Island culture, and recently announced that it may have explained one of the biggest remaining unknowns: How the moai were transported. According to a <a href="http://news.nationalgeographic.com/news/2012/06/120622-easter-island-statues-moved-hunt-lipo-science-rocked/" target="_hplink">new theory</a>, they were carved so they could be rocked back and forth, or "walked," to their destination. It would have required a lot of man power, but no trees, which the island lacked for a number of years. At least that's what the archaeology suggests. The visual comparison to the left, however, makes a compelling argument that Romney could have more direct knowledge about the mighty moai.

  • How Alicia Silverstone Feeds Her Baby

    She "<a href="http://www.huffingtonpost.com/2012/03/29/alicia-silverstone-premastication-pre-chew-food_n_1389544.html" target="_hplink">premasticates</a>." That means she chews her food and spits it into the mouth of her son, who's named "Bear Blu," for some reason. Just like a bird. Thirty years of Romney's tax returns couldn't make you un-know that.

  • Amelia Earhart's Final Resting Place

    The answer to this one may be as boring as Mitt Romney wants you to believe his tax returns are. While it's exciting to concoct theories about Earhart being captured, executed, or actually <a href="http://tighar.org/Projects/Earhart/Archives/Books/BookReviews/earhartsurvive.html" target="_hplink">surviving to assume another identity</a> and live out her life in the great state of New Jersey, the far more likely scenario is that she perished on a remote tropical island in the southwest Pacific. Discovery <a href="http://news.discovery.com/history/amelia-earhart-resting-place.html" target="_hplink">reports</a> that researchers believe evidence found on the island of Nikumaroro suggests Earhart and her navigator, Fred Noonan, died there after an emergency landing. In 1940, a British Colonial Service found skeletal remains on the island consistent with a woman of European descent. Near those bones lay a woman's shoe, an empty bottle and a sextant box for a piece of equipment similar to the one Noonan had used. According to Discovery, they "likely eventually succumbed to any number of causes, including injury and infection, food poisoning from toxic fish, or simply dehydration," at which point their bones may have been picked clean and carried off by enormous coconut crabs.

  • John Boehner's Tan

    If you believe House Speaker John Boehner (R-Ohio), his tan is natural, thanks entirely to genetics, <a href="http://www.politicsdaily.com/2010/09/08/john-boehner-defends-his-famous-tan/" target="_hplink">lawn-mowing</a>, mountain biking and a heavy dose of golf. "I have never been in a tanning bed or used a tanning product," he <a href="http://www.huffingtonpost.com/2010/09/23/john-boehner-tanning-bed_n_736897.html" target="_hplink">said in a 2010 interview</a>. In the absence of any other evidence, we'll have to take his word for it. In this case, it doesn't bother me in the slightest.