Recasting Carried Interest: An Examination of Recent Tax Reform Proposals
2009; Indiana University Maurer School of Law; Volume: 84; Issue: 4 Linguagem: Inglês
ISSN
0019-6665
Autores Tópico(s)Taxation and Compliance Studies
Resumo“The nature of investment vehicles is changing right before our eyes, and the tax code must keep up with the times . . . .” In the spring of 2007, Senator Baucus’s observation resonated with congressional skepticism toward the favorable tax treatment of private equity, venture capital, and hedge fund general partners—“money managers”—who purportedly exploit a “tax loophole the size of a Mack truck.” Congress has proposed to more than double the income tax on carried interest—the payout that fund managers receive when their investments are profitable—to prevent fund managers from receiving a purported windfall. Tax scholars and politicians have cited the preferential tax treatment of carried interest as a significant legal loophole because carried interest superficially resembles the ordinary compensation that school teachers and corporate executives receive. And while school teachers and corporate executives pay income taxes equaling as much as thirty-five percent of their incomes, a private equity general partner’s carried interest is currently taxed at a low capital gains rate of fifteen percent, allowing him to withhold a significant portion of his lucrative
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