The first of these questions was the "carried interest" loophole that allows fund managers to take what are in effect wages as capital gains instead, taxed at a lower rate.
The second question was newer and more interesting:
Midway through the call, a reporter asked if Romney’s individual retirement account (IRA) was structured in such a way that it managed to avoid an obscure 35 percent tax called the Unrelated Business Income Tax (UBIT). This issue was first raised by the Wall Street Journal, but the question was asked in such a way that Romney’s Brad Malt was able to dodge it.
“Governor Romney’s IRA is not structured in the Caymans; it’s not located in the Cayman’s. It’s tax deferred just like your IRA, and my IRA,” Malt said.
True as far as it goes. But as NYU tax lawyer Daniel Shaviro explained to me last week, that’s not how this particular strategy works. The key is that this obscure tax can be triggered if an IRA or other tax exempt entity borrows to make investments. But an IRA can avoid the tax altogether by investing in offshore entities that do borrow to make investments of their own. When the dividends return to the IRA, they are exempt from the unrelated business income tax.
Later in the call I asked if Romney’s IRA had investments in any offshore entities that would have been subject to the 35 percent UBIT if the investments had been made an onshore entities. The campaign has promised to get back to me with an answer to that question. We’ll let you know what they say.