Sen. Charles Grassley, who instigated the drive on Capitol Hill to double taxes on private equity funds and their managers, has declared a truce. Given "how the economy has deteriorated, right now maybe we don't want to make Wall Street more nervous," the
Iowa Republican told Reuters Regulation Summit in Washington Tuesday.
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Grassley first raised the idea of hiking taxes on the industry in 2006, when he was still chairman of the Senate Finance Committee. Grassley's willingness to bury the hatchet, at least for now, is a reflection of reality as much as it is a desire to make peace. A bill he introduced with current Finance Committee Chairman Max Baucus that would boost taxes for publicly traded investment partnership never gained any traction, and he admitted it is stalled. The House bill, which would have forced fund managers to pay the ordinary 30% tax rate on "carried interest" was his idea but was pushed most aggressively by House Democrats.
Although raising taxes of any kind isn't a natural for a Republican, Grassley argued that the favorable tax treatment for PE and hedge funds was a loophole that undermined political support of reduced taxes on all capital gains. Grassley blamed the private equity industry lobbying for stymieing both bills. Grassley said he still has hope for another bill that eliminates breaks for offshore hedge fund tax shelters. "That's closing a loophole, that's not raising taxes," said Grassley, now the Finance Committee's ranking Republican. - Bill McConnell
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