But Republicans have long advocated lighter taxes for capital gains on the theory that such favorable treatment will promote capital formation, investment, and risk-taking, and thus catalyze economic growth.
For Republicans, encouraging growth trumps concerns about tax fairness or income inequality. Indeed, at least rhetorically, that’s the GOP’s principal reason for opposing the expiration of the Bush tax rates for upper earners. The well-to-do, conservatives contend, are the nation’s “job creators.’’ Indeed, in the GOP view, it’s more important to protect the tax breaks on upper income than to insulate Medicare and Medicaid from the deeper cuts that will be required absent more revenue.
Democrats, of course, have a different view. They see overall demand as far more important than capital formation or business investment in spurring the economy. For them, income inequality is not simply about fairness, but also economics; if middle-class and lower-income people have less in their paychecks and pockets, they won’t do the consumer spending the economy needs to grow at a healthy clip.
Paradoxically, though Democrats are less enthusiastic about unfettered free markets, they also tend to see capitalism itself as a hardier beanstalk, and thus less in need of tax-cut waterings, than do Republicans. Therefore, Democrats consider tax breaks for the well-to-do, whether on earned or unearned income, as rewards for activity that likely would have taken place anyway.
Now to Romney’s role at Bain Capital. Candidate Romney likes to talk about start-ups Bain backed during its early years, when it was focused more on venture-capital deals that helped build businesses from scratch. And certainly companies like Staples, Sports Authority, and Bright Horizons are the kind of unequivocal job-creating successes that are easy to celebrate.
Romney talks far less about what happened after Bain Capital changed its orientation in the 1990s, moving away from venture capital to focus far more on leveraged buyouts. In LBO deals, a private-equity firm borrows heavily to purchase companies that are then restructured and resold, often for big profits.
