Romney should tout work at Bain Capital
As the Republican primaries intensify, Republican presidential candidate Mitt Romney has been under fire from liberals and conservatives alike for his 15 percent effective tax rate and his time at the financial services company Bain Capital.
Instead of skirting around these issues, Romney needs to start using both his time at Bain Capital and his tax rate to highlight the characteristics that set him apart from fellow Republican candidate Newt Gingrich and President Barack Obama.
Romney is often criticized for his past tendency at Bain Capital to invest in firms and restructure them, often at the cost of jobs.
What people fail to realize is that the companies the financial services firm invested in needed to be restructured: They were operating at losses or had limited growth prospects.
As a result, Bain Capital took over management and reorganized companies like Dunkin’ Donuts and Burger King to become profitable again. Because these companies were already hurting, many of them would have gone out of business, resulting in all of those companies’ jobs being lost.
Bain Capital’s intervention had served to save some jobs that would have been otherwise lost without radical shifts in the company’s way of doing things.
In other instances, Bain Capital’s actions gave struggling companies a business plan to become an international chain, such as with Staples and Domino’s Pizza. Bain Capital created 110,000 jobs, and saved many more, during Romney’s time with the company. His time at Bain Capital serves to show that he not only knows how to streamline the government to make it more efficient, but that he also has experience creating and saving jobs in the private sector.
Romney’s critics also view his tax rate of 15 percent as a detriment to his candidacy. Though Romney earned $27 million last year, most of his money came from investment income, which is taxed at a rate of 15 percent instead of the top income tax rate of 35 percent.
Obama and Warren Buffet, CEO of Berkshire Hathaway, have both criticized this tax rate, citing that it allows the top one percent to be taxed far less than most upper-middle class families.
The reason this tax is lower, however, is because it is a double tax. All investment income is already taxed at the corporate rate of 35 percent, and then again at a rate of 15 percent. This is a tax of 45.25 percent, a higher rate than nearly any other tax.
Moreover, the initial rate is lower because investment income is much riskier. There is a 100 percent guarantee of wage income, provided that you work. There is a very real possibility that investors will lose large sums of money when they make risky investments.
This lower rate is put in place to encourage investment and keep the economy growing.
If Romney embraces these two aspects of his life instead of shying away from them, he can provide a compelling case for pro-growth tax reform and limited government regulation. Under this system, more Americans can achieve the benefits of both personal investment and investment by capital funds.
Emphasizing this would make Romney more attractive to Republicans, who want a nominee that can argue the merits of hard work and free markets, and to the general electorate, who want the economy to get moving again.