Over a decade after leaving Bain Capital, the private equity firm he helped start, Mitt Romney continues to receive millions of dollars from the company, thanks to a retirement deal he negotiated, the New York Times reported Monday.
The paper also notes that much of this income likely is taxed at a much lower rate than ordinary income. That's because, thanks to a loophole in the tax code, it can be classified as "carried interest," which means it's counted as capital gains. Income from capital gains -- essentially profits from the stock market -- is taxed at a rate of just 15 percent -- far below the 35 percent rate that the top earners may on ordinary income.
That raises an interesting point. As we've reported, many of Romney's rivals for the Republican presidential nomination -- including Newt Gingrich, Rick Perry, Jon Huntsman, and Herman Cain (who has since suspended his campaign) -- want to abolish the tax on capital gains altogether, in what would be a major boon for private-equity managers, some of the best-compensated players on Wall Street. Indeed, support for scrapping the capital gains tax almost amounts to an article of faith among Republicans, who argue that doing so will spur investment and reward entrepreneurial risk-taking.
So it's worth noting that Romney's plan -- though broadly favorable to high earners -- stops short of that position, instead calling for the capital gains tax to be eliminated for middle-income households only. So wealthy financial-industry tycoons like Warren Buffett -- or, for that matter, Romney himself -- wouldn't benefit.
Of course, as the Times notes, federal office-holders aren't allowed to hold investments in private-equity firms, so if Romney were elected president, he'd likely have to give up his stake in Bain. Still, it's not hard to imagine that when the Romney camp decided against backing the all-out elimination of the capital gains tax, it had at least half an eye on the candidate's ongoing arrangement with Bain -- and the awkward storylines that might ensue.