Sunday, June 7, 2015

Taxing Story on Carried Interest

Dealbook reported:

Taxing carried interest at ordinary income rates would raise about $18 billion over 10 years, according to a Treasury estimate of President Obama’s recent budget proposal. The Joint Committee on Taxation, which scores congressional legislation, has made similar estimates in the past.

One or two billion dollars a year is more than most of us can find in between the seat cushions. It would roughly double what Congress gives the I.R.S. to spend on information technology. Still, the number is small enough that it makes raising the issue seem petty and vindictive
Only if you're one of the greed and leverage boys or pledge allegiance to Carlyle Group co-founder David Rubenstein.  Here's a take from a former big league business reporter (summer 2011).

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!
Dealbook joined with Rubenstein's disdain on raising preferred carried interest taxation with its "petty and vindictive" stance. This fits with another observation by the former big leaguer:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.
Thus endeth the Dealbook piece:

"If it were so easy to avoid paying tax on carried interest, why would the industry fight so hard?" 
Ask Congress, their ex-members working for private equity underwriters (PEU) and kajillions of PEU lobbyists.  That group knows why.