* The Tribune explains how Bruce Rauner manages to pay such a low income tax rate…
Another lucrative source of equity firm revenue is management fees, essentially charges for the service of overseeing investments. Most equity firms levy a 2 percent annual charge on the assets they manage for clients, but Rauner has said the GTCR charge is 1.5 percent.
Service fees charged by most professionals, be they money managers or plumbers, are typically considered regular income and subject to taxation at the top of whatever tax bracket the individual qualifies for under the federal progressive tax system, tax experts said. In Rauner’s case, that was 35 percent through 2012.
At its core, the fee waiver strategy is an accounting maneuver that blurs the line between management fees charged by equity firms like GTCR to manage funds for investors and profits generated by the firms’ investments in the funds they manage.
In short, equity firms technically waive collecting on millions of dollars of management fees they are owed, but that hardly means they forgo the value of those fees. Instead, that gets reflected as a stake in the very investments they manage.
When the investment fund turns a profit, often within months, the equity firm receives the cash value of the waived fees and distributes that among its partners.
Doing so lowered his tax rate from 35 percent to 15 percent. The Tribune says the IRS is revisiting this loophole.
* But here’s what the attack TV ad will almost definitely focus on…
Complicated tax rules related to those business income losses freed Rauner from paying any Social Security or Medicare taxes in 2010 and 2011, despite his reporting healthy earnings in other income categories and listing a combined adjusted gross income for those years of about $55 million.
In 2010, Quinn whacked Bill Brady hard for not paying income taxes. This time it’ll be about Social Security and Medicare taxes.
Everything old is new again.
…Adding… A real stretch on the Twitters…
Oh, please. Rauner made a gazillion times more than Quinn and his effective rate was two-tenths of a point higher and that’s burying the lede?
Pardon me while I LOL.
…Adding… From the Quinn campaign…
Following today’s front page Chicago Tribune report that Bruce Rauner “would not be releasing” his complete tax returns for the past three years, Quinn for Illinois Communications Director Brooke Anderson issued the below statement:
“Today we learned that Bruce Rauner again gamed the system to benefit himself while the rest of us play by a different set of rules.
“It took Chicago Tribune investigative reporters and a team of tax experts to unearth that Bruce Rauner, among the richest tax filers in America, has been using tax loopholes to avoid paying any Social Security tax and Medicare tax in 2010 and 2011.
“However, Rauner- who has not yet released any tax information from 2013 nor his complete return from previous years- told the Tribune he wouldn’t be releasing his complete tax returns to the public.
“Even Mitt Romney disclosed his complete tax returns to be transparent with voters.
“What is Bruce Rauner hiding?
“As a candidate for statewide office, Rauner has a duty to disclose his complete tax returns - including schedules -for the last three years, especially 2013.
“To not do so would be a total disservice to the people of Illinois.”
Today’s Tribune story reports that Rauner used elite tax strategies not available to everyday people to shield his wealth from paying his fair share in taxes. These particular tax strategies are under investigation by the IRS.
To date, Rauner hasn’t disclosed his complete tax returns for the last three years. In addition, he has not disclosed any tax information whatsoever for 2013.