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Summary:  
Congress should introduce a law closing the "Romney Loophole" to prevent corporate pirates like Romney from benefiting from favorable tax rules designed to encourage new investment in time for the 2012 election.  

Background:
Mitt Romney pays a 15% tax rate on his income, which is conveniently categorized as "capital gains" income.   It is tax policy in the United States to reward people who place their money at risk by investing it in new companies or other ventures, with a lower tax rate if those investments make money.  In short - the capital gains tax rate is a reward for taking risk and putting money to work.

The Romney Loophole:  
Mitt Romney is correct that current tax law allows him to treat the money he made at Bain Capital as capital gains.  However, Mitt Romney never put his own money at risk at Bain, and instead invested other people's money.  In finance terms, he never "wore the risk" that his investments would go bad; his own money was never at stake.  Thus, there is no justification for this type of income qualifying for capital gains treatment.  This is a perfect example of legalized cheating on your taxes!  

The Solution:
Congress should introduce a bill to eliminate the Romney Loophole in time for the measure to be considered prior to the 2012 election.  Only people who put their own money at risk should be eligible for the 15 percent tax rate.  Let's put Romney's actions front and center, and make clear that Big Money fat cats pay their fair share of taxes.

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Comment Preferences

  •  Tipped and Recc'd... (4+ / 0-)
    Recommended by:
    xopher, DRo, Bear, Cedwyn

    ...just for the name "Romney Loophole". It's about time we got the framing right on this.

  •  It's Investor Welfare (2+ / 0-)
    Recommended by:
    DRo, Cedwyn

    and we're all paying for every dollar that is not collected as ordinary income.

    Furthermore, it also does mot contribute to Social Security or Medicare contributions.

    Cheating our Senior Citizens and future retirees who had to contribute from their ordinary income.

    They're just sophisticated tax cheats.

    Mojo?!?! What mojo?

    by xopher on Thu Jan 19, 2012 at 01:00:04 PM PST

  •  "Romney Loophole" (2+ / 0-)
    Recommended by:
    eXtina, Cedwyn

    should become synonymous with "Tax Cheat", and there should be punishment.

    Be the change you want to see in the world. -Gandhi

    by DRo on Thu Jan 19, 2012 at 01:04:41 PM PST

  •  OMG naming the loophole after him (1+ / 0-)
    Recommended by:
    Cedwyn

    Brilliant! forever associating the practice with this out of touch one percenter, will doom his political future

    "I'm sculpting now. Landscapes mostly." ~ Yogi Bear

    by eXtina on Thu Jan 19, 2012 at 01:09:59 PM PST

  •  Get rid of the loophole & the loop it rode in on (1+ / 0-)
    Recommended by:
    Cedwyn

    Abolish the capital gains provision. The money you make with your sweat, and toil, and brain should not be taxed higher than the money you make with your money.
    Risk? Investors risk their money? How about firefighters and miners and farmers risking their lives?
    Tax those gains at least as high (higher!) than taxes on "ordinary" income. And slap the Social Security and Medicare taxes on them, too; and no limit on the upside, either.

    For political palatability, exempt the gains on IRAs while the money is still in the IRA, but tax it upon distribution.

    Dear Ayn Rand fans: Please, would each of you just go all John Galt, immediately? Thank you.

    by CitizenJoe on Thu Jan 19, 2012 at 01:20:40 PM PST

  •  The taxation of carried interest has not changed (0+ / 0-)

    in more than half a century and is an established part of partnership tax law. It is hardly a "loophole". It was under assault in 2010, but the investment management industry mounted a huge effort to beat it back. This one issue has galvanized Wall St, and the investment partnership industry, in a way that I have not seem before. There will be some vary serious money spent in 2012 to defend the historic treatment of these ownership interests by partnership managers.

    "let's talk about that"

    by VClib on Thu Jan 19, 2012 at 02:20:06 PM PST

    •  What's a loophole? (0+ / 0-)

      Meriam-Webster defines a loophole as:

      "a means of escape; especially : an ambiguity or omission in the text through which the intent of a statute, contract, or obligation may be evaded."

      I don't think that this loophole has been in existence for many decades changes its fundamental nature.
      •  greenie - it's not a loophole (0+ / 0-)

        A fundamental part of partnership law is that profits and losses do NOT need to be allocated on the basis of capital accounts. Rather ownership interests, and profits and losses, are negotiated by the partners and captured in a contract, the partnership agreement. For tax purposes all partners are treated the same. So if the investment partners are willing to give the management partners an equity stake in the assets of the partnership, that is their choice and US partnership and tax law respect that choice. This has been the law for more than half a century, and is the farthest thing from a loophole I can imagine.

        "let's talk about that"

        by VClib on Thu Jan 19, 2012 at 03:48:44 PM PST

        [ Parent ]

  •  Let's talk politics.... (0+ / 0-)

    It would be a shame for us to get hung up on whether the capital gains tax rate should be eliminated as we paint Romney as an out of touch vulture capitalist.  

    As I see it, there are three potential groups we need to convince that Romney would make a bad president.  They are:

    1.  The half of the electorate who think a capital gains tax rate of 15 percent is appropriate.

    2.  The half of the electorate who think capital gains should be taxed as ordinary income.  

    3.  The 99% of the electorate that hates a tax cheat and thinks Romney took advantage of the system.  

    I don't think we need to pit Category #1 and Category #2 against each other in order to agree on #3.  So as we message this, let's stick with #3.    
     

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