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.
Partners at firms such as Bain, which buy companies, as well as at hedge funds, qualify for a 15 percent tax rate on “carried interest,’’ or the profits they make on investment deals. This type of pay - which often adds up to millions of dollars annually for these executives - is taxed like capital gains, rather than as regular income, which is subject to a 35 percent tax for the wealthiest taxpayers.
The Obama administration has proposed closing the carried-interest loophole, while the industry has argued that the move would hurt the economy - that investment executives need these incentives to put their own capital at risk. In the case of Romney, his retirement agreement with Bain had him receiving payouts for at least a decade after he left the firm in 1999. A spokesman for Bain Capital declined to comment.
Advocates of using the tax code to reduce income inequality are especially critical of the “carried interest’’ tax break. “It’s probably the biggest loophole in the tax code for super-rich people,’’ said Jacob S. Hacker, a professor of political science at Yale University and co-author of “Winner-Take-All Politics.’’
“The idea that private equity managers and hedge fund managers should pay 15 percent, when in fact they’re just getting a cut from the pool of capital under management - it’s completely egregious,’’ Hacker said.
“There’s very little risk that’s being borne by these people,’’ Hacker said. “It’s a big subsidy for a certain kind of financial management.’’
