Politifact's analysis of Senator Reid's charge can be found here. Below is some analysis of key paragraphs of Politifact's piece.
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.
Genius. NOT! This is mostly meaningless statistical BS about what percentage of taxpayers might have done what Romney is accused of. The one thing Politifact came up with is that Romney would have to have a lot higher than average set of deductions in order to get his tax liability down to zero. There is absolutely no examination of methods that Romney might have used to achieve these far higher than average deductions.
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.
More statistical BS, only slightly more useful. 7.5% of the top 400 taxpayers in 2008 paid between 0 and 10% in income taxes. Still no reason whatsoever why Romney could not have paid zero taxes.
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.
Here Politifact admits it has been wasting our time with the previous discussions but goes back to statistics to show it is unlikely Romney paid no taxes. And, as before, this is completely irrelevant because it does not look at ways Romney might have achieved such large deductions.
After quoting several people who have not seen Romney's tax returns and say it is unlikely, even preposterous to suggest, that he paid no taxes for 10 years, Politifact finally gets close to the truth:
"Charitable donations can shield up to only 50 percent of tax liability, while other means can lower the rate," the article said. "But to pay nothing, Romney would have to sustain business operating losses, Kamerman said. The IRS lets people carry over losses for up to 20 years until they make a profit from which to deduct them. But Kamerman said this is almost certainly not the case for Romney."
We already know that Romney has said he gives a lot of money to the Mormon Church, which he likely claims as a deduction. Now we find out that the only way Romney could achieve such huge deductions is from business operating losses. But after stumbling across this critical nugget, Politifact suddenly, and mysteriously so, stops investigating the possibilities. And this is even more strange when even a cursory google search would have brought out two examples of Romney claiming losses to avoid taxes. The most well-known tax deduction is Anne's horse
Rafalka. The second obvious example, which became far more obvious over the last few days, is a
scheme to avoid paying property taxes in California.
Ok, now for the other things that Politifact missed and did not even hint at. If you want to know just how possible it is that Mitt Romney managed to avoid paying taxes, you would learn a lot more from this DailyKos diary that you would from reading the Politifact discussion. One thing you would learn is that Romney specialized in helping others, potential investors in Bain, avoid taxes by using off-shore tax shelters. Again, this important detail is oddly missing from Politifact's piece.
In addition to the above examples of Romney specifically using losses as a tax avoidance strategy, there is also the huge Romney IRA, which is definitely a tax avoidance strategy and is also completely missing from the Politifact story. There is also the possibility, again mysteriously missing from the Politifact story, that he gave huge gifts to his children and used this strategy to avoid paying taxes.
Another point that needs to be made is the ease with which many corporations avoid paying taxes. One can make a lot of money and still avoid taxes. Some of the same tax avoidance strategies are used by corporations, like showing a loss on paper even though you actually had profits, could also apply to Mitt Romney.
These discussions and others are all missing from the Politifact article. But also missing is the discussion of Mr. Romney's veracity when it comes to statements made about paying taxes. As documented by Rachel Maddow, Mr. Romney lied in 2002 paying Massachusetts taxes. In addition to this, Romney has demanded that political opponents show tax returns although he himself never has, often changing his story to avoid showing his taxes.
It is entirely possible that Mitt Romney is lying again about his taxes. And there are lots of documented ways that Romney could have reduced his tax burden down to zero. Politifact made a few phone calls and maybe did a Google search or two. But they did not follow up on important parts of the story. They are incompetent.