Romney as Multimillionaire Gets Break for Taxes - Bloomberg

That’s because private equity executives, as Romney was for 15 years when he ran Boston-based Bain Capital LLC, receive much of their compensation in what is known as carried interest. That enables them to treat what would be ordinary income for other service providers, taxed at rates as high as 35 percent, as capital gains taxed at 15 percent.

The Republican front-runner said yesterday in Florence, South Carolina, that his effective tax rate was “probably” close to 15 percent because his income “comes overwhelmingly from investments made in the past.”

Yet those investments were largely made by Romney’s former partners with other investors’ money, not his personal funds. The vast majority of the resulting gains represent compensation for Bain’s work acquiring, sprucing up and selling individual companies, critics say.