I know this site may seem to be going hard and heavy after Romney in the last 24 hours, but truth be told, it’s just too much fun. And we’ve been shooting at Obama for so long that even this brief interlude of close scrutiny of Romney would not come close to achieving “balance” if “balance” as opposed to trying to get past the PR, were our objective.

Tax maven Lee Sheppard has a new piece up at Forbes on Romney’s tax returns, which I suggest you read in full. It has juicy discussions of Romney’s investments, and the sus-looiking grantor trusts (which appear to be making investments in funds that are taking the tax position that they are engaged in a trade or business, which seems really unusual, to put it politely). And Sheppard looks to have scored a personal win. She flagged Ann Rommey’s horse Raflaca as not credible as a business, and lo and behold:

Expense for Raflaca didn’t show up on the Romneys’ 2011 return. The campaign admitted that the expenses were regarded as personal.

But her discussion at the top really caught my eye. Mitt did not pay 13.7% in taxes in 2011. He paid a lower rate and made a voluntary contribution, which tax law does not consider an extra tax. Yet he’s been characterizing this donation as a tax. This is a misrepresentation.

And if he chooses to, he can change his mind about that voluntary contribution. He has three years to amend his returns. What do you bet he won’t take that gimmie back if he loses his Presidential bid?

This is the germane section of Sheppard’s post:

We are edging closer to understanding why Romney won’t disclose his returns for the last five years. Newsies have been operating on the theory that Romney zeroed out in some years, but that is probably wrong…. The Romneys chose to forgo a 2011 deduction for $1.8 million of their gifts, to get their tax rate up to 14.1 percent. Without that gesture, their tax rate would have been far less than the 13.66 percent Romney stated that he has been paying. That’s nice, but the tax law does not consider the voluntary payment of more than is owed to be a tax. The tax law considers it to be a contribution to the federal government (section170(b)(1)(A)(v) and (c)(1)). So the Romneys didn’t pay a 14.1 percent tax rate. The Romneys reported $1,935,708 on line 61 of Form 1040–not all of which was really tax. They paid a lower tax rate plus a $270,000 ($1.8 million times 15 percent) voluntary contribution. What happens to the $1.8 million the Romneys didn’t deduct? They have three years to amend the 2011 return to deduct it.

She also takes a dim view of the PricewaterhouseCoopers letter the Romney camp has circulated in lieu of making customary disclosures:

It’s a self-serving declaration. A trial judge wouldn’t admit it into evidence. We are not required to believe a self-serving declaration from a big accounting firm just because it is a big accounting firm.

Oh, but it’s one of the remaining Big Four accounting firms! There are only four of them left because one was put out of business under threat of criminal indictment for dressing up Enron’s books. Not so long ago, all of the big accounting firms were full-bore tax shelter merchants. Several firms, including PwC, settled tax shelter promotion disputes with the IRS.

But just for fun, let’s parse the wording of that self-serving declaration. The letter states that there were both federal and state taxes owed each year. This takes into account Romney’s admission that he has been audited “from time to time” in the past.

The PwC letter states that the lowest “effective federal personal income tax rate” Romney paid on his adjusted gross income during the years 1990-2009 was 13.66 percent. The statement that he paid some tax in each and every year is consistent with the theory of a successful housing market punt with Paulson. That is, Romney might have paid a little tax on a lot of money made in a very ugly way. There is no such concept of “effective federal personal income tax rate” in the tax law. PwC invented this concept by dividing adjusted gross income by federal income taxes shown on the returns. Adjusted gross income is not taxable income. Romney’s itemized deductions are fairly high, because of his investment expenses. Although he pays alternative minimum tax, his only add-back is state income taxes. Moreover, the income from the estimated $100 million in his IRA is completely sheltered from taxation. The IRA is believed to contain special classes of shares of companies acquired by Bain Capital. The PwC letter says Romney paid an “average annual effective federal rate” on his adjusted gross income of 20.2 percent for the years 1990-2009, during much of which period capital gains rate exceeded 20 percent.

Put more simply, the fact that the PwC letter is so tortured is a smoking gun in and of itself. But since it is above the pay grade of pretty much anyone except tax wonks, it will probably succeed in stumping at least some of the critics.