Romney’s current tax rate is about 14 percent because of something called “Carried Interest.”
But what is carried interest?
Basically, it’s a share of the profits of an investment partnership that is paid out to the manager of that partnership.
According to his recently released tax returns, as manager of Bain Capital, Mitt Romney received $12.9 million in carried interest over two years.
Because he invested other people’s money – it was a “carry” – and he was taxed at only 15%, not the 35% that regular income is subject to.
So, on that $12.9 million he paid just $1.9 million in taxes at the 15% rate, instead of the $4.5 million he would’ve paid if it had been taxed as regular income.
That’s an extra $2.6 million in Mitt Romney’s pocket.
But it’s a loophole.
CNN Contributor David Frum thinks the less Mitt Romney says on the subject the better.
“[Mitt Romney] should soldier on and allow the voters to decide how important it is,” says Frum. “He should not talk about it in the context of himself.”
CNN’s Chief Political Analyst Gloria Borger agrees with Frum in theory but thinks Romney should have a plan in place when the issue is raised.
“Americans don’t begrudge anyone their wealth,” says Borger.
We called a number of people working in the financial industry to see if they could justify this loophole, but outside of the private equity lobbying groups, no one even tried.
Almost everyone agreed that it’s right to reward people for investing money, because it encourages them to start businesses and create jobs, but few agree with rewarding someone who invests other people’s money and takes very little risk themselves.
The majority of our Strike Team – a group of the nation’s top CEOs, entrepreneurs and innovators – believes Mitt Romney would be better at handling America’s economy than President Obama.
We’ve asked Mitt Romney to appear on the show numerous times to discuss the economy and his tax rate but he has always declined.
We don’t know Mitt Romney’s official position on the carried interest loophole. The few times it seemed like he would be open to raising the rate on carried interest, he reversed course later.