There is realized income (wage) and capital gains income, (income derived form investment or stock holdings equity etc.) Anyone.. poor, middle class or rich that received dividend income from say stock holdings is taxed at the flat 15% capital gains rate.
Money managers effectively become part owners of the assets they manage as a result of the fee structure such as Bain where Romney once worked. Imagine that investors, pension plans, endowments, whatever, put $100 million into a private-equity fund. The fund turns a profit of $15 million. The people who run the fund would get $2 million as a management fee, plus $3 million as a share of the profits.
The $2 million is taxed as income; the $3 million is taxed at the (much lower) capital gains rate. If the private equity guys borrowed the money, invested it, and made a profit, everyone would agree that the profits should be taxed as capital gains, that’s what the capital gains tax is for, according to David Weisbach, a tax prof at the University of Chicago.
In private-equity funds, the investors’ money is structured as equity, rather than debt.
So how does this apply to Romney, given that he’s no longer working as a private-equity manager? In what would be the final deal of his private equity career, he negotiated a retirement agreement with his former partners that has paid him a share of Bain’s profits ever since.
Since Mr. Romney’s payouts from Bain have come partly from the firm’s share of profits on its customers’ investments, that income probably qualifies for the 15 percent tax rate reserved for capital gains, rather than the 35 percent that wealthy taxpayers pay on ordinary income. The media is trying to spin this for what is it not, don’t be fooled.
The Romney Tax return:
8A- Interest income
9a Dividend income
13 Capital Gains (majority)
17 Trust
This is a lynching by the left to fool the uneducated people that that he is paying some kind of lower rate, when in fact he is paying the same rate as anyone for those types of incomes.
See Tax Return HERE
