Outrageous Tax Policy Loophole

Daily Herald (Arlington Heights, IL), October 8, 2012 | Go to article overview

Outrageous Tax Policy Loophole


Outrageous tax policy loophole

Most people have heard that Mitt Romney pays a low tax rate because most of his income is from investing. But, surprisingly, he also pays this low rate on millions of dollars of compensation for services that he previously rendered at Bain Capital. By structuring his transactions to exploit a loophole for so-called carried interest, much of his compensation has been taxed at capital gain rates, as if from investment.

That loophole is available to a very few taxpayers in very limited industries. Proponents will tell you that because their income is tied to their results, they are taking the risk and deserve this tax break. But try to explain that to every commission salesperson, every lawyer who takes a contingent-fee case, and even every waiter and waitress. And all kinds of business people, from CEOs on down, get bonuses based on their results and the results of their companies, yet they don't get the cheap rate. In fact, for most workers, if they don't get results, they lose their job. But that doesn't qualify their work for capital gain treatment.

Proponents argue that the companies in which private equity invests pay lots of taxes. Some do; others don't. Why should that change compensation into capital gain?

Romney has expressed contempt for the 47 percent who pay no income taxes. But you have to wonder how many of the other 53 percent would be offended if they understood that he is making millions of dollars of what is effectively compensation, but paying tax at a much lower rate than many typical workers.

David J. Roberts

Associate professor of accountancy

DePaul University

Keep power lines to yourselves, Illinois

I grew up in the western suburbs and moved to New Mexico 30-plus years ago. I was back to Chicago last month and caught the article on electrical infrastructure not allowing the solar potential of the desert Southwest to be fully realized.

Here's what I think: Why don't you generate your own darn electricity? Those of us in the Southwest didn't move here to see mile after mile of transmission lines, or to see the vast open areas paved with solar panels!

ComEd or whatever they are called now was smart enough to put nuclear plants near Chicago back in the 1970s. Adding one more of them would do more good than 100 square miles of solar panels (especially at night), and you could look at it yourselves, not those of us more than 1,000 miles away. …

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