EMMANUEL DUNAND/AFP/Getty Images
Republican presidential hopeful Mitt Romney addresses a primary night victory rally in Manchester, New Hampshire, January 10, 2012. AFP PHOTO/Emmanuel Dunand (Photo credit should read EMMANUEL DUNAND/AFP/Getty Images)
At last night's Republican debate, Mitt Romney said that if he sews up the nomination, he would likely release his tax returns, as opponents and the Obama Administration have demanded. This is from USA Today:
I think I've heard enough from folks saying, look, let's see your tax records. I have nothing in them that suggests there's any problem and I'm happy to do so. I sort of feel like we are showing a lot of exposure at this point. And if I become our nominee, and what's happened in history is people have released them in about April of the coming year and that's probably what I would do.
OK, so Romney isn't necessarily the most blissfully fluid speaker in the land. It's hard to blame him for nonlinear sentence structure after the 734 debates he's endured in his quest to take on the president in November. But a more important question looms: What would we learn from Romney taxes?
Not much, really. He's rich, but he isn't RICH, as Jeffrey Winters notes in the Huffington Post:
The gap separating Romney from the average voter is far larger. With a net worth of about $250 million, Romney has roughly 1,800 times the wealth of the average American household.
Even invested conservatively, his fortune is big enough to generate a steady income of over $1 million a month after taxes. That means every three days, Romney earns a return on his wealth roughly equal to the total net worth of the average American household.
Wealth on this scale definitely qualifies Romney as an American oligarch, although he is not a truly big fish when it comes to wealth concentration. Among American oligarchs he ranks in the middle of the pack. This is because wealth is concentrated to a mind-boggling degree at the top.
As poor as Romney is (relatively), he still benefits from a key rich guy tax loophole from his time at private-equity firm Bain Capital, which his returns would expose: "carried interest." This is from The Atlantic:
Managers of private equity firms like Romney are often paid under an arrangement in which they receive both a set fee for their management, as well as a share of the profits that the firm makes for investors. While their management fees are taxed at normal income tax rates, the share of investor gains that go to a private equity manager (called "carried interest") are treated as capital gains, and thus taxed at a top rate of 15 percent. (Hedge fund managers and partners in real estate ventures also benefit from receiving carried interest.)
Would this be awkward for Romney? Well, everyone who understands Romney's wealth already knows it, so the awkwardness would come from having it thrust into the open, where Romney would have to explain the whole concept of providing massive tax breaks to the richest of the Wall Street bunch. Even more awkward would be the connection that voters might make between carried interest and the tendency of private-equity firms to lay off workers when they take over companies (largely using massive amounts of debt, it should be pointed out).
Private equity doesn't always succeed in turning companies around. But the business isn't predicated on losing money, so managers still try to make their cash and satisfy their investors, even when their companies go bankrupt (and without private equity, they might have gone bankrupt, anyway). Making millions on failure and then paying less tax on it than most people do on everyday income is where Romney may have some real issues to deal with.