Political Animal

Blog

December 27, 2011 12:30 PM Romney’s ‘carried interest’ problem

By Steve Benen

We talked last week about Mitt Romney’s decision to keep his tax returns hidden, despite the fact that every major-party nominee in the post-Watergate era has released their tax records. Romney’s position has already generated some pushback from Newt Gingrich and Rick Perry, and if Romney wins the GOP nod, Democrats will likely keep this going.

It’s worth noting, however, that Romney isn’t just being secretive for the sake of secrecy — there’s a good reason he’s rejecting transparency. Alec MacGillis flagged this Boston Globe piece, which suggests Romney is, in fact, paying a lower tax rate than nearly everyone else, which probably has a lot to do with his campaign’s decision.

In case anyone needs a refresher, there’s a tax loophole on “carried interest” — sometimes called “the carry” — that taxes private equity and venture capital income at a lower, 15% rate, as compared to 35% on ordinary income. Hedge-fund managers and the Wall Street have fought tooth and nail to protect this loophole — even after the Obama White House tried to eliminate it — and so far, they’ve been successful.

Because Romney still collects seven-figure checks from his vulture-capitalist firm, he’s paying less in taxes than middle-class families nationwide. And with that in mind

Romney also indicated that he would not shy away from a legal tax break that shelters partners at private equity firms, like Bain Capital, from high tax rates on the largest part of their take-home profits.

“I can tell you we follow the tax laws, and if there’s an opportunity to save taxes, we like anybody else in this country will follow that opportunity,” he said.

Let me summarize the political problem this way:

1. Mitt Romney is worth $250 million.

2. He got rich by laying off American workers.

3. He pays a lower tax rate than you and the rest of the middle class.

4. He wants to be president so he can keep it this way.

I don’t know if voters will find this offensive or not, but it certainly explains why Romney is so eager to keep his tax returns under wraps.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

Post a comment
  • Hedda Peraz on December 27, 2011 12:37 PM:

    -I'm sorry, I wasn't listening.
    Did you just say that Obama is Black?

  • SadOldVet on December 27, 2011 12:40 PM:

    Mittens Romoney is still not in the class of Steve Forbes! Forbes prior unsuccessful runs for the repuknican party presidential nomination where based upon the main platform of cutting his own taxes.

    Poor Mittens only partially made his money the old fashioned way by inheritance. Forbes money was virtually nothing else.

    Must be getting better at this. Only 3 tries to correctly decipher Craptcha.

  • Walmarton Friedman on December 27, 2011 12:49 PM:

    Mitt whole campaign is based on his success as a Private Equity Fund Manager, so when Mitt offers, if elected, to take a management fee instead of a yearly salary for his management of US Private Equity: The Nation, we'll know it won't be for reasons of magnaminity, but rather to slip his compensation under the 15% carried tax rate, rather than having to pay the 35% income tax rate.

  • Danp on December 27, 2011 12:50 PM:

    I guess unemployment is nice work if you can get it.

  • Grumpy on December 27, 2011 12:50 PM:

    What does Romney gain by keeping his tax returns secret? Withholding them is sufficient evidence of the damaging supposition. The only way Romney wins is if his secrecy is, in fact, bait to lure a rival campaign into accusing him of tax shenanigans then, at a late date, Romney shows his squeaky-clean tax returns and wins the hand.

  • c u n d gulag on December 27, 2011 12:53 PM:

    Mitt’s father was a lot closer to the old American work ethos, you know, the ‘pull yourself up by your own bootstraps,’ that Conservatives all espouse, than his son.

    Mitt’s more of the modern American work ethos – polish and lick your Daddies boots and straps until you inherit his money.

    Mitt tells about how his father gave his children chores to do to instill them with a work ethic. I think he hated work, because Mitt has spent his entire life eliminating work for as many people as possible – to the the enrichment of himself, his family, and his friends and cronies.

    My ad against him would be simple and consist of editing his face onto the painting of this young man, and start off asking “Is this who you want as your next President?”:
    http://en.wikipedia.org/wiki/File:Thomas_Gainsborough_008.jpg

    And then, it would say, "Now, we do have admit that Mitt really isn't all that blue. He isn't blue because unlike you he pays a lower rate of taxes than you do, has for a long time, and wants to keep things that way. If you like where the country has been going over the last 30 years, and want it to keep helping the rich get richer at the expense of the middle class and poor, who keep getting poorer, then Mitt's your man, and go vote for him. With pride! Because soon, that's all you'll have left."

    I mean, even Little Lord Fauntleroy started off poor, before inheriting great wealth. That, and, after having been poor, instead of learning their lessons of how a young aristocrat should act, he went about teaching compassion to his new rich relatives.

  • Peter C on December 27, 2011 12:58 PM:

    I thought Mittens was so poor he had to live in his son's basement??? That's what the Massachusetts voting records said, right?

  • DAY on December 27, 2011 1:05 PM:

    Not being a theologian, I don't know- but I ask:
    Don't Mormons have to (10%) tithe, every year?
    And doesn't that deduction show up on a 1040?

  • Walmarton Friedman on December 27, 2011 1:08 PM:

    Grumpy: It is squeaky clean in the United States to earn $1 billion in fees from managing a Private Equity Fund, call it "carried interest" instead of income, and pay a 15% tax rate. Declaring "Carried Interest" in this country is not a shenanigan. That's the problem. Mitt and his peers screw the rest of us by not paying the 35% income tax rate and it is perfectly legal!

  • Kathy on December 27, 2011 2:28 PM:

    You're a jerk, Mr. Benen.

  • Nikki on December 27, 2011 2:53 PM:

    Wow, the ads really do write themselves. All anyone has to do is put your 4 bullet points up on the monitor and everyone will get it. Good job.

  • A Conservative Teacher on December 28, 2011 9:38 AM:

    Funny- you demand that other people pay higher taxes than they are supposed to under our tax code, yet you yourself have never donated anything to the Tax Me More fund or sent extra money to the IRS. People who loudly demand others do those things which they choose not to do themselves are called hypocrites, and thus are lairs and deceivers and the kind of scum that no one should pay attention to.

    The minute you start donating large portions of your wealth that you do not have to under our tax code to the IRS, then start chirping about others and pretending that you've got something. Until then, shut up.

  • rip on December 28, 2011 9:45 AM:

    When the time comes, the Democrats should just go ahead and put out ads accusing Mitt of not wanting to release his tax returns because he pays such a low rate, instead of merely challenging him to release them.

    Republicans ascribe motives to their opponents through conjecture routinely. Democrats will need to do the same in order to carry 2012.

  • Wildson on December 28, 2011 3:38 PM:

    Steve, it seems like you brought out some crazies attacking you for implying the rich to pay their fair share.

  • John B on December 28, 2011 3:42 PM:

    If Mitt does release his taxes, would he need to release anything other than 2011? And if not, why wouldn't he simply structure his 2011 return to avoid this problem?

  • smartalek on December 30, 2011 8:10 PM:

    "you demand that other people pay higher taxes than they are supposed to under our tax code." A Conservative Teacher December 28, 2011 9:38 AM

    Thank you, "Conservative Teacher," for providing a data-point in support of a theory I've had: that one cannot be a "conservative" (as defined in our current polity; the term in other times and places has meant something very different) and a good "teacher."
    Nobody here has suggested anything even remotely along the lines of what you've just ascribed to -- whom, exactly?
    Everything written here is consistent with the beliefs that most commenters here likely hold, which include that the tax code, as currently written, is inequitable, imbalanced, and economically counterproductive.
    Under the Republican-led changes in the tax codes, along with many other changes in the laws, and in our economy, the multi-decade upward redistribution of incomes, wealth, and opportunity has resulted in the first generation of Americans ever in our country's history who have, as a whole, not done better than their parents.
    Close to three quarters of the citizenry are doing the same as, or worse than, they were 30 years ago -- while the top 5% -- and especially the top 1/2 of 1% -- are doing fabulously better.
    If the tax code were simply returned to the state it was in during the Clinton boom years, over a third of the deficit -- about which today's "conservatives" pretend to be so concerned -- would disappear.
    Since the Republican / plutocrats' claims that low taxes on the corporations and the very wealthy would lead to accelerated rates of job-creation, and increased prosperity for everyone, have been completely disproved by every detail of the economic history of the last century, returning to the previous taxation models would not only be more fair, it is almost certain to be a necssary element in returning to a fast-growing economy.
    THAT is what many people writing here largely believe -- and they believe it because it's demonstrably true.
    So the only question is, when you suggested otherwise, with the classic straw-man BS of your type, were you deliberately lying -- or are you truly so confused and propagandized that you actually believe that anyone here said anything like what you falsely claim they said?
    Either way, I pity any students you might subject to such treatment.

  • Pragmatus on January 01, 2012 1:17 PM:

    If Mittens is the nominee, he will have to answer for every crappy thing Bain Capital did to working America, and every position he has taken more than one extreme on, and also to the religious goons in his own party who just can't get fired up about him.

    Game, set, match.

  • FosterGrant on January 02, 2012 10:29 AM:

    Now wait just one cotton pickin' minute! Mittney is just like many Americans, i.e. forced to live in a development where his home is cheek-to-jowl with the neiggbors'. http://www.mockpaperscissors.com/blog/wp-content/uploads/2011/08/Willards-house.jpg

  • Peter Reilly on January 09, 2012 10:28 AM:

    I really think "carried interest" is overrated as a tax abuse. More interestingly though I do not think Obama is really that interested in getting rid of it. The most recent legislation would not have gotten it done.

    http://www.forbes.com/sites/peterjreilly/2012/01/07/could-romney-use-his-own-return-to-call-obamas-bluff-on-carried-interest/

  • Ksec on January 16, 2012 3:20 PM:

    Romney made his money the American way. By jamming his penny loafers on the necks of the working class and choking the wealth out of them.
    Gob bless us each and every one.

  • mike on January 16, 2012 7:46 PM:

    I see we have a lot of wealth envy liberals here. In case you didn't know, there is no law forceing romney, or any other politican, to make there tax records public. So get over it

  • Jeff on January 18, 2012 9:42 AM:

    Mike, I see guy who misses the point and lacks basic writing skills. There is no law that says presidential candidates have to tell us what they will do if elected. There is no law that says presidential candidates have to produce their original birth certificate. There is no law that says they have to tell us what religion they follow. Fine, Romney can keep his little secrets. I hope he does. But when part of the debate is taxes and distribution of wealth people want to know where a candidate stands. Tax returns are a great indicator of where a candidate stands on the issue of economically raping the little guy.

  •  
  •  
  •