“Carried interest was intended to motivate managers going forward,” said Victor Fleischer, an expert in carried interest at the University of Colorado law school. “In cases like the Romneys, it just shows it is really all about fancy tax planning. It’s not motivating managers going forward. Not only is Mitt not providing any future services, Ann never did.”
In recent years, the carried-interest deduction has proved controversial on Capitol Hill. There have been several unsuccessful efforts to eliminate the tax break, which critics say improperly treats profits like capital gains, and tax these earnings as ordinary income at 35 percent.
Some tax experts worry that the arrangements Romney benefits from set a bad precedent for a president. “He looks for every tax angle to a degree that is unbecoming in someone who would be the executive in command of the administrative apparatus that enforces the tax law,” said Lee Sheppard, a tax lawyer and contributing editor for Tax Analysts, a publication for accounting and legal professionals.
Only the rich and connected get to treat their labor as if it were capital (and thus get a 50%+ “motivational” tax break) . This is *the* problem, not a solution.