Republican Sen. Lindsey Graham strongly took issue with Senate Majority Leader Harry Reid's accusations that Mitt Romney has not paid taxes in 10 years, saying Sunday that the Democratic leader was "lying."

"What he did on the floor of the Senate is so out of bounds. I think he's lying about his statement, of knowing something about Romney," Graham said on CNN's "State of the Union."

In a Huffington Post interview published Tuesday, the leading Democrat said that an unnamed investor with Bain Capital, Romney's former private equity firm, told Reid in a phone conversation that Romney had not paid taxes for a decade.

Reid stood by the allegations Thursday while speaking on the Senate floor.

"The word's out that he hasn't paid any taxes for 10 years," he said. "Let him prove he has paid taxes, because he hasn't."

Taking questions from the media after an event Friday, Romney responded to the allegations from Reid, reiterating his call for the majority leader to "put up or shut up."

"Harry, who are your sources? Let's have Harry explain who that is," Romney said.

The candidate said firmly, "I have paid taxes every year, and a lot of taxes, so Harry is wrong."

Echoing those sentiments Sunday, Graham said the majority leader was "making things up" to distract from the "real issues."

"I just cannot believe that the majority leader of the United States Senate would take the floor twice, make accusations that are absolutely unfounded, in my view, and quite frankly making things up to divert the real campaign away from the real issues," the South Carolina senator told CNN Chief Political Correspondent Candy Crowley.

Reid defended his words in a statement Thursday night, saying Romney is "hiding something," and he called on the presumptive GOP nominee to release more tax returns.

"When it comes to answering the legitimate questions the American people have about whether he avoided paying his fair share in taxes or why he opened a Swiss bank account, Romney has shut up. But as a presidential candidate, it's his obligation to put up and release several years' worth of tax returns, just like nominees of both parties have done for decades," Reid said.

Responding to Graham's statements on Sunday, Reid's spokesman Adam Jentleson said in a statement it was "sad" that Romney "has forced his party to defend his decision to hide the truth about his tax returns."

"As Senator Reid has said, an extremely credible source informed him that Mitt Romney did not pay taxes for ten years," Jentleson said. "It's clear Mitt Romney is hiding something, and the only way for him to clear this up is to be straight with the American people and release his tax returns."

Romney has made public the full 2010 tax return and an estimate for 2011, with a pledge to release the full year once it's complete. He filed an extension for an October deadline.

Meanwhile, Romney's team has insisted that President Barack Obama's re-election campaign was encouraging Reid to make the attacks from behind the scenes.

Asked if Obama's team was pushing the majority leader to stay on the offensive, senior campaign adviser Robert Gibbs did not directly answer the question Sunday but further called on Romney to reveal more of his tax information.

"I think it's important that we know the financial background of candidates," Gibbs said on "State of the Union."

Obama's campaign has been at the forefront of calls for Romney to release more tax documents, insisting the presumptive GOP nominee make public as many as 12 years' worth, which his father, the late George Romney, released when he ran for president in the 1960s.

"We could put this to rest tomorrow. Mitt Romney can got to Kinko's, photocopy his tax returns. There are several hundred pages. He could hand them out to people like CNN and to reporters all over the country, and we wouldn't talk about this tomorrow. We wouldn't say, 'Is he paying taxes? What's he paying?' The whole world would know what loopholes he's taking advantage of," Gibbs said, adding he would provide Romney with nickels to make copies.

Romney, however, has repeatedly said he has paid his taxes in full and will not release anything further.

His campaign adviser, Eric Fehrnstrom, said Thursday on CNN's "The Situation Room" that Romney has "never zeroed out his tax liability" and "has always paid 100% of what was owed."

One of Romney's biggest surrogates in the Senate, Sen. John McCain of Arizona, also came to Romney's defense on Thursday, saying Reid may have "gone over the line."

"To accuse someone of doing something without a shred of proof-that the allegation has any substance-is really something I, frankly, don't understand," McCain said on CNN's "Anderson Cooper 360.

McCain, whose 2008 presidential campaign reviewed Romney's tax records as they considered him to be the vice presidential running mate, said last month he can "personally vouch" that there was "nothing disqualifying" in the tax returns of the presumptive GOP presidential nominee.