Rational Irrationality: Mitt’s 1040s: The Real Scandal is the Tax Code : The New Yorker: Under an obscure but vigorously defended item of the tax code, managers of hedge funds and private-equity funds are allowed to classify much of the fee income they receive from their investors as “carried interest,” which the I.R.S. treats in the same way as a capital gain. In a conference call with reporters this morning, Benjamin Ginsberg, a senior attorney for the Romney campaign, revealed that in the past two years Bain Capital has paid Romney almost $13 million in “carried interest”—$7.4 million in 2010 and $5.4 million in 2011.
The “carried interest” deduction has no economic justification—firms like Bain don’t put any of their own capital at risk to generate it—but its sure helps folks like Mitt. If he and his wife had been forced to treat that $13 million as regular income, they would have had to pay about $4.5 million in federal tax on it. As it was, they paid about $1.9 million in taxes, saving them a handy $2.6 million.
Nice “work” if you can get it.