Romney's 15-Percent Problem
Alec MacGillisJanuary 17, 2012 | 3:09 pm
Would it be possible for Mitt Romney to handle the problem of his tax returns any worse than he has? By withholding them as he has, he has built up anticipation among political reporters who could generally care less about such matters. Romney's equivocating answer in the debate last night about whether he would release the returns sent Fox News' audience-response "hedge-ometer" machine literally off the charts. Then this morning he went ahead and confirmed the most salient fact in the returns: that he pays a rate of only about 15 percent. And in the process, he managed to suggest that the money he makes in speaking fees -- more than $370,000 last year alone -- is "not very much." *
I'll leave for another day the question of how Romney's violation of the "Buffett rule" will play with the electorate. For now, let me focus on what could come of all this in terms of the country's discussion of tax policy. In general, it seems immensely useful that the country will be confronted with a concrete reminder that many of the very wealthiest pay a federal income tax rate that is equal to or below what many middle-income Americans pay. I just hope that that discussion takes in the whole picture and does not get focused on one slice of it: the "carried interest loophole" that Romney benefits from. I've done my best the past couple years to draw attention to this egregious section of the tax code, which allows private equity managers to declare as capital gains their compensation for managing others' investments -- typically, a 20-percent cut of profits -- and thereby have it taxed at the 15-percent capital gains rate rather than the top-bracket 35-percent rate for ordinary income. Among other things, I wrote this past summer about Eric Cantor's successful attempts to shield the loophole during the debt-ceiling debate, after years of his having received more campaign cash from the affected financial and real estate sectors than just about anyone else in Congress. And so it's been gratifying to see good reporting laying out the fact that Romney is in all likelihood still benefiting from the loophole -- because he still gets a cut of Bain's profits -- and even some admissions in unusual places, such as today'sWall Street Journal, that the loophole needs to go.
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