Vail Daily letter ‘Carried interests’
Vail, CO, Colorado
It is interesting to note that New York state does not differentiate from a tax standpoint when it comes to “carried interests.”
Yet it has been reported that New York’s attorney general believes that there may be a fraudulent aspect the to way that Mitt Romney and his partners in Bain capital and other investment managers in venture capital firms may constitute tax fraud. A substantial portion of Mr. Romney’s income for which he pays only a 15 percent tax comes from a carried interest in Bain Capital.
“Carried interests” are the compensation expressed as a share of the profits of an investment fund such as Bain capital. As the partners and the managers of firms like Bain capital claim they cannot determine what the present interest of their future income may be, they elect to base their compensation on a percentage of profits of such private equity funds and pay no taxes when they receive their right to their carried interests.
In many instances, they formally waive their management fees in exchange for a percentage of the capital in the fund to be paid out at a later date.
Taxpayers who wish to invest in these funds (and are very often in the maximum tax bracket at the federal level of 35 percent) do so with funds that they have available after they have paid their taxes on their current compensation.
People like Mr. Romney believe that they have the privilege of not recognizing their current income and deferring their obligation to pay current taxes. The gains on these funds are taxed at 15 percent. The profits like those received by Mr. Romney are only taxed once, on the federal level, at 15 percent.
In addition, they do not pay any Social Security taxes or Medicare taxes on the receipt of this income.
The people of New York and the people of the United States should applaud Eric Schneiderman for his courage in taking on this issue in a very important election year.
Mr. Romney misleads us to believe that somehow he will mysteriously produce 12 million jobs, while at the same time cutting the deficit of the country while not impairing the middle class.
Clint Eastwood, in his most inappropriate introduction to Mr. Romney, suggested that the empty chair next to him told him that Mr. Romney should do something that may very well be anatomically impossible.
Instead, if elected president, along with Mr. Ryan, Mr. Romney’s vice presidential candidate, they will most certainly do their best to accomplish Mr. Eastwood’s anatomical suggestion to the American people.