Romney's tax returns have dug up controversial issues lobbyists have worked on for years. K Street's lament: Thanks, Mitt

K Street defenders of tax perks for the wealthy weren’t looking for a poster child, but they’re stuck with one: Mitt Romney.

The release of his tax returns Tuesday put a private equity baron’s face on some of the issues lobbyists have worked on behind closed doors for years: the 15 percent capital gains tax, taxes on carried interest, and write offs.


“The focus Romney has put on these issues and the awkward inarticulate way he’s managed this makes it much more difficult for those lobbyists to do their job,” Democratic consultant Paul Equale said. “Now all of that stuff is out of the shadows and might be much more difficult to make a coherent, policy based case for it, especially because it is now the central issue in the Republican primary campaign.”

The atmosphere for the champions of the one percent was already tough this year. And the emergence of a new anti-hero just makes matters worse ahead of looming battles on Capitol Hill to extend the Bush-era tax cuts and a broader fight over tax reform expected in 2013.

One area that could take a hit in the tax debate is the family trust. Romney’s taxes, which follow all the rules, are an unwelcome reminder that the wealthiest people in the country can set up trusts for their children for tens of millions of dollars, without having to pay taxes on them. Romney and his wife set up $100 million trust funds for their sons.

“I’m not sure people fully appreciate the huge differential between taxation of earned and unearned income and now they are going to understand it,” one Democratic tax lobbyist said. “I’m not sure people are going to think that’s fair.”

Tax lobbyists said the bright light is particularly rough for private equity firms, who are also expected to come under fire this year as Congress looks for new revenue raisers.

The GOP presidential candidate’s bumbling response to attacks on his former firm Bain Capital and more recent mishandling of releasing his tax returns—which show he paid the government less than 14 percent in taxes on $21.7 million in income last year because it came from investments rather than a salary— has been downright awful for the industry.

The increased scrutiny has caused concern among hedge funds and private equity execs as the issues continue to be front-and-center in the GOP primary.

And under attack, Romney hasn’t helped their cause.

In one debate, Romney complained that it was “strange, on a stage like this with Republicans, having to describe how private equity and venture capital work.”

His awkward responses haven’t been lost on the industry he once represented.

“I think there was obviously some hope that he would be a more effective messenger, provide a more coherent response. That has clearly not been the case at least over the last couple of weeks,” one private equity industry executive said.

Instead, the messaging has been left to the industry’s trade association, the Private Equity Growth Council. Titans of the industry have largely kept mum — in some cases probably to their benefit as another multi-millionaire is hardly a sympathetic face. The ramp up, which was already in the works, is starting earlier despite Bain Capital, the firm Romney started no longer being a member.

Private equity firms have long fought proposed hikes to the tax rates for firms that go public and proposals that would increase the taxes on carried interest, the percentage that private equity firms or other partnerships receive following profitable deals.

“The objective of the Council going forward is to aggressively educate key audiences about the important contribution private equity makes to our economy and defend the industry against mischaracterizations and attacks, “PEGC’s Ken Spain said. “As the 2012 campaign continues to ramp up so will our efforts.”

PEGC has been helped by the backlash among conservatives against Gingrich and then-presidential candidate Rick Perry when they tried to bash Romney as a so-called vulture capitalist.

Despite the heat, tax lobbyists aren’t predicting a major legislative push against the industry before the end of the year.

“The reality is this isn’t going to move the needle one way, or another,” Ken Kies of Federal Policy Group. “[Tax reform] is not going to get done earlier than the election.”

Still, Democrats aren’t planning to let the issue go. President Barack Obama is expected to make income inequality and differences in the tax code a central theme of his campaign. Case in point: Debbie Bosanek, secretary for billionaire investor Warren Buffett, sat with first lady Michelle Obama during the president’s State of the Union address Tuesday night.

Bosanek has been the go-to face for Obama’s push for tax reform that includes raising the taxes on people making more than $1 million a year to at least 30 percent.

“Now, you can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes?” Obama said to Congress. “Most Americans would call that common sense.”

Romney tried to pivot in the NBC Florida debate Monday saying, “The real question is not so much my taxes, but the taxes of the American people. That’s why I put forward a plan to eliminate the tax on savings for middle-income Americans.”

He continued: “But I paid all the taxes that are legally required and not a dollar more. … I don’t think you want someone as the candidate for president who pays more taxes than he owes.”