good evening. i'm erin burnett, and outfront tonight, a burning question for mitt romney. today, he got an endorsement from donald trump, and he was all smiles, but another day has gone by without an answer to a crucial question. does he think he should pay more taxes. here are his returns from 2009 and estimated for 2009 and estimated for 2010 and 11. it turns out that 30% of mitt romney's income, $12.9 million, comes from one very specific thing, in these tax years, 2010 and 2011. it's called the carry. and here is how it works. partners in private equity and hedge funds invest money for their clients, and they get a significant cut of the profits they make. that cut, the carry, is taxed at 15%, not 35%, like regular income. now, many people think that it is right to reward people for investing money, for taking risks, with a lower tax rate. they argue this encouraged people to start businesses and create jobs. but almost no one says it's right to reward the guy who invests other people's money with a lower tax rate. after all, romney didn't take the risk. someone else did. we're not down. it's legal, and he didn't do anything that isn't standard, but it's a loophole and it adds up. he would have paid $4.5 million in taxes in the two tax years if the carry were taxed at ordinary income rates. that's more than double the $1.9 million that he paid. we called a lot of people in the industry to try to see if anyone could justify this loophole, which really affects private equity managers solely. outside of the lobbying group, no one even tries. leon cooperman had this to say to outfront today. quote, it seems to me thereat a preferential tax rate should pertain to one's own risk capital and the reallocation from the investor's capital should be earned income, taxed at the ordinary rate. not worth a tv appearance. >> i'm suri you couldn't come on and say that, but you make your point. the burning question, where does mitt romney stand on this issue. he's kind of confusing. here he is with larry cud low. >> i'm not looking to single out some group of people and say let's raise taxes. if it's actually a capital investment and it's fairly priced at the time people invest in it and it rises in value, it turns into capital gain. if it looks like a bonus, it's not a capital gain. >> yeah. keep the carried interest, but no, not if it's ordinary income, yes, no, yes, no. governor romney, can you tep me? we asked him to come outfront because we want to hear about his economic plans. the strike team thinks he's got the best in the republican field when it comes to an economic plan, but we hope he can take a stand on outpen front when it comes to carried interest because the issue is not going away. david is here, gloria borger, and david is a former speechwriter for pridz clinton. this is tough, a loophole, fair and standard in his industry, that almost nobody really defends. michael bloomberg has come out against it, leon cooperman, a lot of people, so he's going to have to take a position on it, isn't he? >> no. the loophole was there, he used it. the longer he is talking about this, the less time hae has some anything else. there is nothing he can say that will satisfy anybody. so often in the political campaign, everybody comes with strengths, vulnerabilities. you talk about your strengths, the things that are going to connect you to people and you do not offer excuses for things in your past that other people may find difficult. you soldier on and allow the voters to decide how important it is. >> what do you think, michael. can he soldier on through this or am i right in thinking that taxes are going to be more important in this election than that? >> in some other year, he could, but this isn't something like having a bad sense of humor or an odd hairstyle or something like this in an election. this is a core issue of public policy that existed before he was the republican front runner and will continue to exist. the idea there's something wrong with this loophole has been going on for years. andrew jackson, pridz andrew jackson had a slogan, equal opportunity for all, special privileges for none. very kind of basic idea, and people might see this as really hitting up against that. >> bain capital lobbied against closing the loophole. there have been seven attempts to close the loophole in recent years. democrats and republicans have chosen not to do so. >> right, i think the wealth gap is going to be a big issue in this campaign. i think president obama made it an issue in the state of the union saying there ought to be a minimum 30% tax rate, and he's raised the buffett rule, et cetera, et cetera, so it's going to be there. the wall street journal wrote something interesting after romney's taxes came out. look, there's a way he can turn this around, erin. that's to say use his own tax return as exhibit a. and say, you know what, this is why we need tax reform. this is why we need lower taxes. this is why we need flatter taxes, and by the way, if you lower the corporate tax, then maybe you take away this loophole. >> interesting point because david from, this is something that mitt romney has indicated, he wants to close loopholes. this loophole, it's a loophole. he could say, i would close it. what is he left with, though. he already got the benefit from it. >> he doesn't want to be talking about himself. that's true for any candidate with any kind of background. it would be, you know, every candidate comes with these problems. and bill clinton had problems. he didn't spend a lot of time reminding people what his problems were, apologizing for his problems. he moved on and said, let me tell you what i'll do for you. one of my favorite political stories. karen hughes tells this, walking down the beach, seeing one of the planes carrying an advertising slogan. it said, jill, come back, i'm miserable without you, jack. bad slogan, too much about you, not enough about her. >> jill, i love you, you're amazing, jack. but it's going to be raised. it's going to be raised anyway. i agree with david in theory, but in practice, barack obama is clearly going to raise this one way or another, particularly since romney seems so uncomfortable in talking about his own wealth. right? so we have to have -- he has to have a plan ready and say, okay, let's make the case for reform. i didn't break any laws. you want to change them, let's make the code flatter and fairer. >> and that would mean people like me are going to pay more money, and i'm for that, but i don't want to raise overall tax rates. he could thread that needle. >> he could get out of this in some respects by proposing tax reform, a system that is more fair. that's where he's in a pickle because anything he were to do that was like that runs right against the orthodoxy that is strong in the republican party that nobody's taxes should go up ever, which he himself repeated. until that hammer luck, the pledge mentality, can be shaken off, he's going to be stuck with this. it's right, this is not occu occurring in a science lab in a vacuum, but president obama is going to make this an issue. the public polls well, and he's going to pound at it. >> it seems to me that he's going to beforced somehow to talk about it. >> he can talk about it but not in the context of himself. i agree with gloria. if you're offering a plan, a concept, but don't apologize. don't look embarrassed. you didn't break the law. and by the way, it was a coalition of democrats and republicans. >> i made this year. >> this is about the new york senatorial delegation more than anything else. >> president obama has to be careful here, because when you look at the polling of americans, they don't begrudge anybody their wealth. they like the fact that people get wealthy in this country. it's part of what we're about. what they want is fairness. so the president can't seem to be on, you know, an argument for class warfare. he's got to talk about fairness. that's a pretty delicate balance he's got to strike as well. >> thanks to all three of you. it seems like we have come up with something. a tax plan that was creative and got rid of loopholes and maybe that might do it. barack obama, meanwhile, is turning up the heat on the governor at a prayer breakfast. jesus may be on obama's side. we'll get to the bottom of that. >> and police and protesters clashing in egypt. horrible violence going on at this hour in central cairo. and leon panetta said something shocking today. israel attacking iran this spring. with thermacare heatwraps. thermacare works differently. it's the only wrap with patented heat cells that penetrate deep to relax, soothe, and unlock tight muscles for up to 16 hours of relief. that's 8 hours while you wear it, plus an additional 8 hours of relief after you take it off. can your patch, wrap, cream or rub say that? 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>> what we have at the moment is several hundred people have made it through. they've knocked down a barrier in one of the roads. they've clashed with security forces and made it basically to the outside walls of the interior ministry. many of these protesters blaming the interior ministry and its security forces for not providing adequate security at the port said game, many accusing the minister for allowing it to happen. basically working with what they describe as thugs in the crowds in port said who allowed, basically allowed this bloodshed to happen, erin. >> let me ask you, you had another day. yesterday, you said a lot of this was a result of the political upheaval, lack of authority and control in cairo. any sense that's getting worse today? >> well, certainly, what we're seeing is that the government is on the defensive, but one bright point today as we saw that there was this emergency session of parliament to discuss the bloodshed in port said, and it was broadcast live on egyptian television, and we saw one deputy after another get up and blast the government, blast the interior ministry, blast the supreme counsel of the armed forces for its mishandling not only fof the situation in port said, but a general deterioration of security in the country. and egyptians were glued to the screen because they were accustomed to the parliament under mubarak where half were asleep and the other half were wasting time. they're seeing a vivid display of democracy at work. so that does show people that there has been a change. there has been an improvement, but there are worries about security and the general state of political instability in the country. >> ben wedeman, thank you very much. now, the high stakes showdown against iran. there was a stunning prediction today from defense secretary leon panetta. hit my in box, i said, really. he said he believes there is a quote strong likelihood that israel will strike iran in april, may or june of this year. now, the military operation would target iran's nuclear program. a program that israel and obviously many others including the united states is developing nuclear weapons. mike rogers, chairman of the house intelligence committee. good to see you, sir. appreciate it. do you have any sense of what leon panetta was saying in how significant his comment was? how big of a strike this might be, how unusual, what the repercussions might be? >> well, little surprised he was as aggressive in his talk as he was. we had lots of conversations in classified settings, a little taken back by how clear his prediction might be about israel's intensions. i'll tell you this, one of the things about iran is they're really pushing the envelope. we know they're aggressively pursuing a nuclear weapon program, announced as much by saying taking enrichment facilities to gome, which is difficult to get at militarily. we know their external operations have been in high gear, including political assassination attempts here in the united states. what israel has to decide is what is our red line? what is the line that iran crosses where we say we can't have that happen. it's too dangerous. a middle east nuclear arms race is dangerous for israel ark really dangerous for the region and dangerous for us. that's what i think all of this talk is right now about where israel is. >> and would you support an israeli strike on iran? >> i think a unilateral strike by israel is not helpful. it takes middle east allies to the united states and makes them have to oppose israel. it comes with a pretty high cost. now, we have a defense treaty that will support israel if they're attacked and we will live up to that. i would hope that we could do this if necessary to try to slow the program, sanctions are taking hold. the u.s. congress passed tough sanctions. >> right. of course. >> that's really starting to take hold. the one thing that is missing here is we're not sure that iran really believes when the administration says everything is on the table. if we can make them believe everything is on the table with sanctions, meaning the possibility of military strikes, that could be the thing that tips us over and backs them down. >> it sounds reasonable, as you say it, although interesting, david sangar, a friend of mine at the "new york times," has talked about in an election year, we always hear the rhetoric turn up on iran. here's a quick sense of what i mean this year and other election years. >> we cannot tolerate a nuclear iran. it would with a game changer. >> that old beach boys song bomb iran. ♪ bomb bomb bomb >> whatever stage of development they might be in their nuclear weapons program in the next ten years during which may might foolishly consider launching an attack on israel, we would be able to obliterate them. >> obliterate, bomb, bomb, bomb. that was 2008. it sounds like we're hearing that again. has the threat just changed or is this just hey, election year, iran. >> one thing we've learned is that mccain can't sing. that's the one thing we have learned. >> join the crowd. >> exactly. the one thing that concerns me is iran has made steps to become a nuclear weapon state. that's why this anxiety is out there. this is different than election year rhetoric mainly because the president has been really behind this. the u.s. congress pushed him to do sanctions. we have been arguing that you can't let israel get to their red line so that they unilaterally launch an attack and right now, they look back and aren't sure where the united states is and that's what this big unknown causes uncertainty and i think that's why you see so many people are just so nervous about what happens in the next few months. >> thanks so much. appreciate you taking the time to be with us. a man returns home from his honeymoon alone, charged with murder. his wife's murder. and the super bowl just days away. mixed taped and madonna are next. 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