Private Equity And Hedge Funds Take Note: Here's How A Big Tax Hike Is Coming From Somewhere You'd Never Expect

The hedge fund and private equity industries have been talking about this for a while — a potential tax hike from the Obama administration.

Now we know more about where it’s coming from. Bloomberg’s Cristina Alesci reported on Money Moves yesterday that the tax hike would come from health care reform legislation passed two years ago.

Yeah, we didn’t see that coming either.

The law would raise taxes on capital gains income by 3.8% — that includes carried interest, dividends, annuities and royalties.

The tax hike only applies to individuals making over $200k from capital gains income, or couples making more than $250k from capital gains income. So hedge funds and PE shops won’t be the only ones impacted by this law, it’s just certain that they’ll be impacted by it.

And of course, they’re not happy. Here’s what the PE Industry’s lobby group had to say about it. (via Bloomberg).

“Raising taxes on capital gains income could adversely impact future investment in all sectors of the economy,” Steve Judge, president and chief executive officer of Private Equity Growth Capital Council, said in an e-mail. “The new surtax would apply to all long-term capital gains investments, including carried interest.”

Watch Alesci explain it below (via Bloomberg).


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