Term Sheet

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Romney campaign dodges tax question

January 24, 2012: 11:01 AM ET

Mitt Romney used to support the carried interest tax loophole. Now we have no idea.

Mitt Romney today released his 2010 and 2011 tax returns, which showed that he earned $12.9 million from carried interest, or the percentage of investment profits earned by private equity fund managers. And he also took advantage of a tax loophole that treats carried interest at the capital gains rate of 15%, even though someone else put up the original investment dollars. All perfectly legal.

What we still don't know, however, is if Romney still believes that carried interest deserves to be treated as a capital gain, or if it should be treated as ordinary income (which, for Romney, would boost the rate to around 35%).

Romney supported the status quo when running for president last time around, saying the following in an interview with TechCrunch:

With regard to carried interest associated with venture capital, real estate, private equity, I do not believe in raising taxes. And it is a capital gain because those individuals do make an investment, it's a small investment, but they make an investment of their own capital and I would treat capital gains as capital gains instead of trying to re-categorize them as normal income.

But during a media call earlier this morning, the Romney campaign would not reaffirm that position. When asked  if Romney still believes carried interest should be taxed as a capital gain -- a yes/no sort of question -- his representatives became unartful dodgers.

They said that Romney is opposed to raising anyone's taxes. That's usually code for "no change on carry tax." But then they also said that he believes in a cleaner, fairer tax system that includes fewer loopholes, so long as it's done in a comprehensive manner. That's usually code for "carry tax is on the table."

So I followed up, asking if Romney could indeed support a change to carry tax if part of a comprehensive package. Rather than answering, the campaign moved on to the next questioner.

It's bizarre. This is an issue Romney addressed directly five years ago, but today it's apparently some sort of trap question that must be deflected. To be clear, the campaign didn't say: "We need to get back to you." They avoided it entirely, even though it was sure to come up on a day when Romney reported nearly $13 million in carried interest income and just hours before President Obama is expected to address the loophole in his State of the Union.

Romney likes to talk about himself a a decisive leader. But on this issue he's either planning to change his mind, or doesn't have the courage to hold his ground.

Sign up for my daily email newsletter on deals and deal-makers: GetTermSheet.com

Join the Conversation
About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

Email a Tip | @danprimack | RSS
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.