Jeb Bush wants to sound like he’s tough on Wall Street, but the idea that he’ll actually start chipping into carried interest with higher tax rates is about as believable as his father’s “Read My Lips” pledge proved.
In a recent tax reform plan, Bush said he’s going to crack down on the use of the capital gains tax rate if elected President — something that would pinch Wall Street in the wallet in a big way:
“We will retain the deductibility of charitable contributions but cap the deductions used by the wealthy and Washington special interests, enabling tax-rate cuts across the board for everyone. And while we’re doing that, we will treat all noninvestment income the same, so unless you stake capital in an investment, you won’t be able to claim the capital-gains tax rate on your market gains,” he wrote in an op-ed in The Wall Street Journal.
By putting carried interest — the lifeblood of private equity and venture capital — in his crosshairs, he moves further to the middle of the political spectrum amid a crowded gang of wannabe presidential nominees.
It’s a call that has been repeated before, popular with blue-collar voters, and, unknown to much of the constituency, unlikely to implemented.
Private equity and investment bankers that pump cash into GOP campaigns will do whatever they can to stop the taxation onslaught.
Wall Street isn’t stupid, and the masters of the universe that work here have spent years and millions of dollars sidling up to politicians.
Thanks in part to the 2010 United States Supreme Court decision that opened the floodgates of corporate cash into the electoral process, the brand names of finance have been doing what any smart investor would be doing faced with a close bet: hedging.
For example, Goldman Sachs, which as a firm has pumped millions into recent elections, first supported President Barack Obama in 2008, and then swung to Massachusetts Gov. Mitt Romney in 2012. Big names in private equity have bet both sides of the fence; this year Henry Kravis has thrown his support behind Jeb Bush, even hosting a fundraiser in his home for the once-presumptive GOP nominee — but others have plowed capital behind the stumbling campaign of former Secretary of State and ex-New York Senator Hillary Clinton.
There are also a number of big names on Wall Street and within the private equity industry that have backed Democrats over Republicans. Perhaps they’re millionaires who never lost touch with their liberal roots; or on the other hand maybe they’re just bright enough to know to take both sides of a bet they can’t afford to lose.
Ultimately, the feigned debate over carried interest within the GOP is a lot like the late 90s cult classic “The Big Lebowski.” There are a lot of compelling personalities and a wild story, but at the end, it turns out that nothing of any consequence will have happened at all.
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