Many reported today on Mitt Romney's refusal to release his tax returns, but the Boston Globe went a step further and zeroed in on Romney's strong hint that he is, in fact, taking advantage of the loophole on "carried interest," which allows his income from Bain Capital to be taxed at only 15 percent rather than the 35 percent rate for ordinary income.
This is significant. At the outset of this week, the New York Times broke the story that Romney is continuing to get a large cut of the profits from the leveraged buyouts that Bain has been involved with since he left the private equity firm in 1999. The Times speculated that Romney was possibly taking advantage of the highly controversial but fiercely-defended carried-interest loophole, aka "hedge fund loophole," which allows private equity executives to have their compensation for managing others' investments taxed at the 15 percent rate for capital gains, even though the pay is largely their compensation for labor rendered, not the result of their own capital investment. Since the remainder of Romney's income this past decades comes primarily from gains on his personal investments, which are taxed at the 15 percent capital gains rate, his taking advantage of the carried interest loophole for his Bain take would suggest his overall federal tax rate is somewhere around 15 percent.
Well, his comments reported by the Globe's Matt Viser and Beth Healy sure make it sound as if Romney has, in fact, been taking advantage of the loophole:
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.
Keep an eye on this. Tax policy is arcane stuff, but it's a pretty good bet -- a $10,000 bet? -- that we're going to hear more about the fact that at a time of rising awareness of economic inequality, the likely Republican nominee, a quarter-billionaire, is paying a lower federal tax rate than not just Warren Buffett's secretary, but millions of Americans far less well-off than he.