Robert Reich: Mitt Romney's Capital Gains Magic

Here's a new video from Robert Reich, Chancellor's Professor of Public Policy at UC Berkeley, about the magic of "capital gains," the promary source of Mitt Romney's income and how it is that Romney could make $21 million in 2010 alone and pay only 13.9% in taxes. Reich breaks down how our tax law is skewed so badly to allow hedge fund managers, and private equity investors like Romney, to reap so much in reward while never risking a dime of their own money.

You can read more from Robert Reich at his blog.

Dems Target Romney Tax Loophole

In a companion piece to my earlier post, Democrats are also looking to close a tax loophole that allows hedge fund managers to avoid paying the standard 35% tax rate on their capital gains, a loophole used by presidential candidate Mitt Romney. The loophole would reduce the deficit by $23 billion over the next ten years.

"Under current tax law, certain kinds of financiers, including private equity investors and some managers of hedge funds, are allowed to treat bonuses like long-term investment income, called carried interest, taxable at the maximum 15 percent capital gains rate. Others have to pay up to 35 percent taxes on their labor income. The cost to the U.S. Treasury is more than $1 billion a year."

Continue reading here.

Salon: Billionaires Ruin Democracy

Linda McQuaig and Neil Brooks have a new book out from Beacon Press, Billionaires' Ball: Gluttony and Hubris in an Age of Epic Inequality, and Salon was permitted to excerpt portions of the book prior to release. Give the entire thing a read, but here's a sampling of what to expect:

"He identified the fact that managers of private equity, venture capital and hedge funds were claiming a significant part of their incomes as capital gains (taxed at 15 percent), rather than treating them as regular income (taxed at 35 percent). That substantial difference in rates was magnified by the enormity of the incomes in question. A private equity manager receiving, say, $600 million as a capital gain would pay $90 million in tax. If the same income were treated as income from salary, it would be taxed at 35 percent (and also be subject to a 2.9 percent payroll tax), bringing the private equity manager’s tax bill to $227.4 million — almost $140 million more.

"The ostensible purpose of the lower capital gains rate is to compensate investors for the risk they take in investing their capital. But private equity and fund managers aren’t investing their own capital. They’re investing other people’s capital. They’re simply money managers. By claiming capital gains treatment, they are passing off regular income as capital gains, simply to save themselves taxes."

Continue reading here.