After last week’s news cycle, we know that part of the reason Mitt Romney pid a 13.9% tax rate was because of the 15% tax rate on carried interest profits.This week, Mother Jones has a story about how that tax rate has survived for so long. The year to really look at is 2007, when the private equity industry tripled its lobbying efforts (read: money) — from 1998 to 2006, PE firms spent $3 million a year on lobbying. Bain was no slouch in this campaign.
After Democrats won control of both the House and the Senate in the 2006 midterm elections, they advanced several pieces of legislation that threatened to end this lucrative quirk of the tax code and other tax policies that favour the rich… The firm (Bain) spent $300,000 between August of 2007 and April of 2008 lobbying the House and Senate on bills that threatened the carried interest loophole. Along with other private equity titans like Kohlberg Kravis Roberts and Apollo Management, Bain and its ilk paid lobbying shops, public relations firms, and trade groups like Ogilvy and the Private Equity Growth Capital Council an estimated $15 million between January 2009 and April 2010 to convince lawmakers to keep the loophole alive. The force of those combined lobbying efforts kept the carried interest loophole wedged open, denying the federal government some $10 billion in revenues in the process.
Last year, Bain terminated its membership with the Private Equity Growth Council (which has raised over $70,000 in 2012 alone), but that doesn’t mean they don’t spend money on lobbying. According to OpenSecrets.org, they spent $560,000 on lobbying in 2011.
As for the carried interest tax rate, we spoke to Joseph Rosenburg of the Tax Policy centre. He estimates that raising the carried interest tax rate could boost rax revenues by about $2 billion a year, but that’s just a rough estimate.
And yes, that $2 billion (which was in President Obama’s budget proposal last year) is just a drop in the bucket considering our country’s trillions of dollars of debt, but aren’t we in kind of a tough spot?