Obama wants to kill the sweet tax break that limited partnerships have enjoyed for years–the one that allows firms to pretend that performance fees are actually long-term capital gains:
Obama’s 2010 budget proposal, released today, proposes raising taxes on the managers by treating carried interest, the portion of profits they take from successful investments, as ordinary income instead of capital gains. That change would boost the tax rate, starting in 2011, to 39.6 per cent for most executives from the 15 per cent they now pay…
Venture-capital firms have sought to be excluded from any tax rise. The policy would also affect executives of real estate and oil and gas partnerships.
Hedge-fund executives typically get a carried interest, though little of it qualifies for capital gains rates under current law because the funds typically take short-term positions in the market. Those executives would face higher taxes on any profits from “side-pocket” funds they hold for hard-to-sell investments.
How are executives in these wildly sought-after jobs taking this news? Like Obama is taking candy from a baby.
Specifically, they are threatening (through trade groups) to go do something else.
We imagine they’ll be back soon. When they discover taxes are also paid in other industries.