Could the private equity party be grinding to a halt just as it’s getting started? Senate Finance Committee Chairman Max Baucus, D-Mont., said Thursday the panel is studying whether to raise taxes on the carried interest that buyout firms collect, which is currently treated as capital gains and taxed at a 15% rate, rather than at 35% like regular income.
"We're trying to do what is right here," Baucus said, according to Reuters.
The issue goes to the heart of the ongoing debate over whether PE folks are job-slaughtering barbarians that burp and pillage their way across the corporate landscape or honorable citizens in an economic system that believes in giving companies, safely returned to the private market, a second lease on life.
Douglas Lowenstein, president of the Private Equity Council, a trade group comprising top buyout firms that wish to exercise their constitutional right to affect public policy, said at The Deal’s recent private capital symposium that “we need to convince people that PE is a positive force, and we need research and anecdotes to tell that story."
On Capitol Hill the story picks up again Monday, when the Finance Committee is scheduled to meet for closed-door testimony on taxing PE earnings. One of the scheduled speakers is Victor Fleischer, a professor at the University of Colorado who argues against treating PE profits more favorably that other kinds of compensation. —Alain Sherter
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See “Two and Twenty: Taxing Partnership Profits in Private Equity Funds,” by Victor Fleischer.
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