Friday, November 9, 2007

Bush Determined to Defend PEU Manager's Preferred Tax Status

President Bush made it clear he would veto a bill requiring millionaire private equity fund managers to pay taxes on "income" vs. "carried interest." The House narrowly passed the measure 216-193, ensuring any Bush veto would stick. The measure faces greater difficultly in the Senate.

So why the threatened veto? George W. Bush stated he would veto any measure funded by increasing other taxes. Republican rhetoric would leave one to believe it's just the same old "tax and spend" Democrats. But why cater to the fat investment houses? Because they fund many Congressional campaigns, Republican and Democrat. A Bloomberg report had the following:

The vote was a defeat for hedge funds and private-equity firms, which have spent $6.1 million this year lobbying against a tax increase. The bill would more than double the tax rate on so- called carried interest, the compensation that executives at buyout and venture-capital firms, as well as real estate partnerships, receive for investment services. The House measure also would require hedge-fund managers to pay tax on income they defer in offshore accounts. The two provisions would generate $49.5 billion over the next decade.

However, the vote is only a temporary defeat as the Private Equity Council, a lobbying group for private equity underwriters (PEU's) gears up for a Senate fight. My guess is they own enough Senators to turn the tide their way. If not, the President already said to his rich friends down Pennsylvania Avenue, "Don't worry. I've got your back." Meanwhile the President shows 300 million Americans his backside.