Romney is claiming that he paid at least 13% in taxes every year. I call bullshit. As discussed here, Romney had a capital loss carryover in 2010, which means that he realized so many capital losses in 2009 that he couldn’t use them all to offset capital gains.
What’s interesting is that Romney’s claim could be literally true but misleading — which means that Romney is full of bullshit, but not a dirty liar. Suppose, for the sake of argument, that a wealthy taxpayer earned $1 million in speaking fees (ordinary income), had a portfolio of investments that increased in value from $100 million to $150 million, and realized $10 million in capital gains and $15 million in capital losses. Net income for tax purposes for the year would be negative, and the taxpayer would pay close to $350,000 in income tax, and would carry forward a capital loss of $5 million. This would show up as a high tax rate – 35% of the $1 million in ordinary income — but doesn’t fairly reflect his economic income.
Romney’s claim may be literally true only because our method of tax accounting doesn’t calculate economic gains until those gains are realized through a sale or some other disposition. Romney may have paid tax at a rate higher than 13% on his 2009 return, but the dollar amount was likely to be embarrassingly small as a percentage of his economic income and wealth. That’s why he doesn’t want to release his tax returns. Normal people don’t think like tax lawyers — they would see a tiny amount of tax paid and recognize the injustice.
Even though Romney’s economic income was probably high in 2009–the Dow went up about 15% that year–savvy investors know they can cherry-pick losses to offset realized gains. The capital loss carry-forward on Romney’s 2010 return suggests that he did just that.
According to Harry Frankfurt, bullshitters, unlike liars, do not deliberately make false claims about what is true. In fact, bullshit need not be untrue at all. Rather, bullshitters convey a favorable impression of themselves while remaining casually indifferent about whether what they say is true. They quietly change the rules governing their end of the conversation so that claims about truth and falsity are irrelevant.