Wednesday, August 8, 2012

How Harry Reid Managed to Lie Without Technically Lying.

Harry Reid is in the news saying that an unnamed source at Bain Capital claims that Mitt Romney didn’t pay taxes for ten years.  Politifact has given him the dreaded “Pants on Fire” rating, because he has nothing solid to back that up.  Historically, unnamed sources have occasionally been unreliable.  This is because they can’t be fact checked by their accusers and because they frequently have their own reasons for talking to people.

If Mitt Romney wasn’t a public figure, this would be slander.  Unless the slanderer can prove that it’s true.  So Harry Reid has no choice but to prove it or shut up.  This should be a no-brainer, right?

Wrong.  Stunts like this are all too common in politics.  The response is fairly typical.  Republicans are outraged (although rightly so, I think), and Democrats are insisting that Romney should release his tax returns to prove Reid wrong.  Guilty until proven innocent; something that can typically only happen in the court of public opinion.  Ironic side-note: the only other place I know of that someone can be guilty until proven innocent (sort of) is tax court.

But I digress.  Reid has made no effort to retract or qualify his statement.  Some Democratic supporters have even gone so far as to suggest that the people at Politifact are being unethical, because there is no basis for the accusation.  Amongst others, Matt Yglesias at Slate has slammed Politifact for saying they don’t know, because they haven’t seen the returns.  Politifact's basis for the accusation can be seen hereBoth Yglesias and Reid have admitted that they don’t know if the accusations are true.  Neither side can prove anything, so no one is lying.  But Mitt Romney is being dishonest because he won’t release returns that he might not have paid taxes on, even though that can’t be proven.  I’m getting dizzy.

Is it possible for Reid to be a liar, even if we can’t prove he’s lying?  He appears, at the very least, to be guilty of willful disregard of the truth.  Harry Frankfurt of Princeton University defines this phenomenon as “bullshit” in his essay entitled “On Bullshit”.  But he states a bullshitter isn’t a liar.  A bullshitter is someone who says whatever is convenient, and isn’t interested in facts.  Is Harry Reid just a bullshitter, not a liar?

Maybe not.  It certainly wouldn’t make sense for a Democrat to believe that.  When George W. Bush took us to war in Iraq claiming that Saddam had weapons of mass destruction (something that we know now is false), Democrats called him a liar.  Bush claimed that based on the intelligence available at the time, he had reason to believe it was true.  But Democrats claimed administration officials ignored evidence from intelligence officials.  This would make Bush a bullshitter by the Frankfurt standard.  So which is it?  Either Bush and Reid are both liars or both bullshitters.

What made Bush a liar in the eyes of Democrats is that he knew or should have known there were no WMDs.  Based on that logic, if Mitt Romney did in fact pay taxes, then Reid is a liar because he should have known before leveling the accusation.  Under the standard set by Democrats, Harry Reid is almost certainly a liar.  I know this because I know that it’s virtually impossible that Romney did not pay taxes.

Here’s what is known.  We know that Mitt has paid taxes before.  In 2010, Romney owed about 3 million in taxes.  He actually paid the government about 4.6 million, meaning he was owed a 1.6 million dollar refund.  Instead of taking the refund, he applied the 1.6 million to his 2011 taxes.  This improves Mitt Romney in my eyes a bit.  He effectively gave the government a 1.6 million dollar loan, interest free, at a time when the government could use some extra scratch.

So how could he have not paid taxes at all over the course of ten years?  If a Bain Capital source claims this, it almost has to have happened when Mitt Romney was involved in Bain Capital between 1984 and 1999 (or maybe 2002, the end year’s somewhat controversial).  Here’s how that could happen:

Option one:  Mitt Romney failed to earn taxable income, or had income that was so low that he wouldn’t be subject to income taxes.  Given how much he earned in 2010, his net worth, and the fact that he founded a private equity firm, that seems a tad unlikely.

Option two:  Mitt Romney had income entirely from investments (not impossible, for him) for ten years and his investments lost money over those years and therefore resulted in no dividends or capital gains.  In short, Mitt Romney of Bain Capital is the worst investor of all time.  Also seems unlikely.  And it implies he received no ordinary taxable income from Bain Capital.  If I’m the founder of a private equity firm, you’re paying me a salary.  This all seems a bit far-fetched.

Option three:  Mitt Romney earned income, but had so many deductions that they wiped out his income.  When people start to take a few too many deductions, a funny little law called the Alternative Minimum Tax applies.  Don’t ask me to explain that; my understanding is a bit weak.  As far as I know, everybody’s understanding of the AMT is a bit weak.  CPAs struggle with this one.  What I know is that the law effectively says “you’re too rich to have that many deductions, so we’re ignoring some of them so that you still pay taxes.”  So even if Mitt had deductions out the Yin-Yang, he still pays taxes.  I rate this one very unlikely.

Option four:  Mitt Romney actually evaded taxes for ten years, a serious crime.  And the IRS didn’t notice.  That’s so unlikely that I just got dumber for writing it.  Anyone who reads that will get dumber.

Option five:  Romney used a confusing maze of loopholes and tax shelters to dance around paying taxes.  Tax avoidance as opposed to tax evasion.  Avoidance is legal, although many see it as a bit dickish.  When the IRS sees someone not paying taxes over the long term, they have a habit of changing tax laws to close loopholes and outlaw certain types of tax shelters.  So it’s doubtful that it could last ten years.  Highly unlikely.

Mitt Romney has paid taxes before (in 2010), isn’t a lousy investor, isn’t the type of guy to work for free, and almost certainly couldn’t dance around the tax law (legally or otherwise) without the IRS noticing.  This doesn’t prove that Mitt Romney didn’t avoid paying taxes for ten years.  But it makes it so astronomically unlikely that to accuse him of it is a level of disingenuousness so extreme that it might as well be a lie.  I think the “Pants on Fire” rating is proven beyond a reasonable doubt.  It’s probably safe to say Harry Reid is a liar.  But at the very least, he’s full of bullshit.

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