Saturday, June 23, 2007

Bill Is Offered to Increase Tax on Private Equity

How many of us wish that we could make millions and then only pay 15% on that money? That is the standard practice for partnerships, including private equity managers, venture capitalists and some hedge funds.
Fund managers usually get a cut of those profits — often 20 percent — and that cut, known as carried interest, is taxed as a capital gain, a 15 percent rate. In recent months, lawmakers and labor groups have been increasingly questioning whether these profits should be taxed at the 35 percent rate. A similar debate has been playing out in Britain, where a well-known buyout figure, Nicholas Ferguson, said this month that he and his cohorts “pay less tax than a cleaning lady.”
The cut of the profits that they are talking about is how the fund managers get paid. That to me is income not capital gains and should be taxed as such. The managers are of course screaming that this will limit private equity. That is total nonsense. Are we to believe that they would rather lose the millions in income rather than to pay a higher tax on it?

This has been a shell game for years with the wealthiest among us finding every way possible to not pay their fair share of taxes. This practice has finally come to light in the public conscience. The Democrats need to stand firm and make the necessary changes to the tax code. The nearly free ride for these people needs to end.

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