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NationofChange / Op-Ed
Published: Thursday 12 April 2012
Mitt and others like him won’t like any economic reforms because they’d eliminate the humongous profits they’ve enjoyed at the expense of the rest of us.
How did Mitt Make so Much Money and Pay so Little in Taxes?
Now that Mitt Romney is the presumed Republican candidate, it’s fair to ask how he made so much money ($21 million in 2010 alone) and paid such a low rate of taxes (only 13.9 percent).
Not only fair to ask, but instructive to know. Because the magic of private equity reveals a lot about how and why our economic system has become so distorted and lopsided – why all the gains are going to the very top while the rest of us aren’t going anywhere.
The magic of private equity isn’t really magic at all. It’s a magic trick – and it’s played on you and me.
Jake Kornbluth and I have made this 2 minute video that explains it all in eight simple steps. (Thanks to MoveOn.org for staking us.)
By the way, the “other people’s money” that private equity fund managers (as well as other so-called “hedge” fund managers) play with often comes from pension funds that contain the savings of millions of average Americans.
The pension fund managers who dole out our savings to private equity and hedge-fund guys also take a hefty slice in bonuses. And like the others, they bear no risk if their bets later turn bad. They get their bonuses regardless.
Nor are any of them — private-equity, hedge-fund, or pension-fund managers — personally liable for doing adequate due diligence. They can bet our money on the basis of no more information than what they had for breakfast.
But if these funds lose, you lose. That’s what happened in 2008 and 2009. Some of the losses are also shifted to the government’s Pension Benefit Guaranty Corporation – which means taxpayers lose.
It’s a giant con game, and it continues to this day.
Here’s what has to be done to stop it:
1. End the “carried interest” loophole that allows private-equity managers like Mitt Romney to treat their income as capital gains, taxed at 15 percent, even though they don’t risk a dime of their own income. Their earnings should be treated as ordinary income.
2. Hold the managers of private-equity funds, hedge funds, and pension funds to a “due diligence” standard. So if the funds lose money and these managers didn’t exercise due diligence, the Pension Guaranty Corporation can claw back their bonuses.
3. Raise the capital-gains rate to match the tax rate on ordinary income – especially for short-term investments. Give a tax preference only to “patient capital” – that is, for investments held for, say, five years or more.
4. Resurrect Glass-Steagall.
Mitt and others like him won’t like any of these reforms. They’d eliminate the humongous profits they’ve enjoyed at the expense of the rest of us.
But these reforms are necessary if we’re to take back our economy.
This article was originally posted on Robert Reich's blog.
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ABOUT Robert Reich
ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
Top Stories
By Ronnie Cummins
15 comments on "How did Mitt Make so Much Money and Pay so Little in Taxes?"
May 08, 2012 2:19am
The rest of the world (apart from aformentioned) cringes at the horrific thought of another Republican US president. Abandon hope of a future for our children: accelerated climate catastrophe thanks to the unbridled greed of the few. They can eat their money when nothing else is left.Why do so many Americans seem so naive to those not indoctrinated with the American Dream? How can they still believe in it when it doesn't work for the vast number of poor, homeless, uninsured, fellow human beings? Do Republican voters read anything which doesn't endorse their myopic view of the world?
April 13, 2012 11:25am
This is totally biased and deceitful reporting. What about Income for Hussein Obama our Muslim Marxist White House Occupier (WHO) of Questionable Citizenship?
Obama’s tax return shows 2011 earnings of $789,674 ‘…President Obama's effective tax rate is just above 20 percent — lower than many Americans who earn less.’
By The Associated Press; Carolyn Kaster / AP
http://nbcpolitics.msnbc.msn.com/_news/2012/04/13/11184004-obama-tax-ret...
Wake Up America!
April 13, 2012 4:47am
We bitch but don't take action. Pack of whiners. Is it too late?
April 13, 2012 4:46am
We bitch but don't take action. Pack of whiners. Is it too late?
April 13, 2012 2:51am
For an example of the inequity of our tax system: A 91 year old widower, income $50,000, paid more income tax in 2012 than all ten of the richest corporations in the U.S. combined. That's a true story. It's reality. I know this man!
April 12, 2012 8:44pm
Where's the video?
April 12, 2012 8:22pm
Since the Supreme Court gave away our last chance of being heard among the shouting of monied interests in elections with the creations of Super-pacs, how can we get candidates who would work to enact such legislation/policies elected in the first place? Will Buffet fund Robert Reich's election to POTUS, because the rest of us have little $ left to contribute to try to refute the efforts of all the SuperPacs that would be arrayed against him. And even if We could get Reich elected POTUS, he probably couldn't get his agenda through congress until we get rid of the other 500-some corporate puppets there (as Obama has demonstrated). I'm afraid we need to start with a constitutional amendment that says that corporations aren't people that have a right to vote, and money is not protected speech when it comes to elections, but rather an effort to drown out the protected speech of others. And since congress is unlikely to change the rules they came to power under, we may have to do it by getting most every state legislature to call for a constitutional congress to entertain amendments, which is still an almost insurmountable obstacle.
April 12, 2012 8:17pm
In the end? It matters not. The swine will be installed into the whitehouse....the Lemmings will snicker because "their party" won, idiot kids will continue dying for Israel's wars and our "leaders' lip-prints will still be on the butts of AIPAC and Israel.
April 12, 2012 5:30pm
My theory is that if we raised taxes on the rich, they'd have to invest their money in things that will make more money, instead of putting into it safe stocks that are taxed at a lower rates. Either the added investments or the added tax revenues would benefit the economy.
April 12, 2012 4:23pm
Link to video - ?
April 12, 2012 2:08pm
One-per-cent-Romney’s economic policy for the nation's found in Paul Ryan’s Budget: giving the rich 1% one-trillion tax cuts and paying it by dismantling Medicare and Social Security. Romney dreams of the presidency to protect the extra $100 million he’s made under the Bush's tax cuts and to continue sucking the money udder for years to come. His mentor, Paul Ryan, the House ideologue, dreams of privatizing Medicare leaving millions of elderly Americans scrambling for medical care, and dismantling Social Security stopping the monthly checks to the retired. And the Righties continue attacking the 99% and protecting the wealthy 1%.
April 12, 2012 1:30pm
All sounds great unless you are a retired senior who has their life savings invested to supplement a meager social security check, hoping it will carry you through the rest of your years with increasing/uncovered costs of long term care.
April 12, 2012 12:39pm
Thank Congress for making Swiss cheese out of the tax system for "campaign contributions"! Best Congress money can buy who is sticking it to the middle class who pay most of the taxes and support maggot corporations with their first born's blood. Hope Dr. Reich connects with Ralph Nader, D. Kucinich, B. Sanders, P. Krugman and the Greenpeace for 2016. Take moneybags control of politics by financing elections with tax money ONLY.
April 12, 2012 12:38pm
1,2,4 are good idea a phase reduction for cap gain plus an inflation indexing is a better idea
April 12, 2012 12:15pm
Thanks for letting us know, once again, that the opportunity cards are stacked against working class citizens. We know we are getting screwed but we have no recourse. You mention things that need to be done, and thanks for that, but more informative and helpful would be; here is what needs to be done and this is how it can be done. Short of 'in the srteet in your face resistance' I'm not sure anything will work because, surprise!, the cards are stacked against us. We all witnessed what happened to the Occupy movements.