Higher taxes for the general partners that run private equity and venture
capital firms are closer than ever with the new tax plan unveiled Thursday by
Ways and Means Committee Chairman Rep. Charles B. Rangel, D.-N.Y.
Chock full of goodies for the middle class and lower income, the Democratic
proposal would abolish the controversial alternative minimum tax and increase
the standard exception for a married couple, while also boosting the child
credit. But the $800 billion lost from the AMT over the next 10 years alone
has to be replaced, so House Democrats are looking to the deep pockets of
private capital's general partners to help pay for it, proposing to more
than double the tax rate on carried interest. Under current law, carried
interest — the compensation that partners at private equity and venture
capital firms receive for managing investments, is set at the capital
gains tax rate of 15%.
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The National Venture Capital Association quickly issued a statement
criticizing the tax hike, saying:
The U.S. has built an entrepreneurial ecosystem that is the envy of the world
and we believe that the consequences of this legislation will be to penalize
the very investors who are committed to growing our most critical innovative
industries. We believe that seriously jeopardizing an investment model that
works so well to create U.S. jobs and foster innovation is not the answer.
While Rangel said he doesn't expect the House to vote on the plan this year,
the announcement of the tax plan promises to only be the beginning of a
nasty fight, as Republicans were quick to label the plan "the mother of all
tax hikes," and the beleaguered Bush administration is likely to use it to
rally conservatives to a hot-button issue. — George White
See
the NVCA's statement
