The wicked-witch tax extenders bill is dead
June 24, 2010
As reported in the WSJ Thursday night, the Senate has failed for the third and final time in its efforts to pass a "tax extenders" bill: H.R. 4213 American Jobs and Closing Tax Loopholes Act.
Sen. Harry Reid (D-Nev.) won’t give up yet. He has said he will try to float a stripped down tax hike bill, and I presume it will include the repeal of carried interest. But Reid will probably fail again, since his own Sen. Ben Nelson (D-Neb.) has joined the Republican opposition against this tax hike bill. Republicans will probably block any tax hike. Sen. Nelson specifically said he does not want the carried interest repeal on real estate partnerships, which are a big factor in every state, unlike like hedge funds, private equity and venture capital funds concentrated in New York, California, Illinois, Massachusetts and other larger states. (Sen. Nelson is winning back stripes after his infamous Cornhusker-kickback health care deal.)
Repealing carried interest is losing appeal as more and more leaders oppose its consequences, unintended or otherwise. It’s a growth killer in this weak economy and it’s un-American to tax small businesses with ordinary income after their lifetime of hard work to build up their business with risk capital. These entrepreneurs, including investment managers, deserve capital gains when appropriate. And remember, often times carried interest is ordinary income too.
President Obama’s senior advisor David Axelrod is a premier brander and re-brander expert; it was his profession before joining the Obama campaign. This Congress has taken re-branding to heart too. It’s the ugly side of politics, turning garbage into gold with the right name and campaign to fool the voting public. Did this happen with HR 4213? It went from being labeled a “tax extenders” bill to a “tax hike” bill. Tax extenders implies extending tax breaks and credits to spur the economy. Then the bill was titled “Closing Tax Loopholes.” Selling a business for a capital gain is not a loophole.
Note: There’s been some confusion in the media the past few weeks about the repeal of carried interest; in some instances it has been lumped in with the Fin Reg Senate vs. House negotiations, which are in high gear. Fin Reg is now mostly about debating the Volcker Rule and derivatives, and the carried-interest tax hike on investment partnerships is not part of it. It was part of HR 4213 only and that is now dead. The status of Fin Reg as of Friday morning, June 25: The final details of the legislation have been agreed on by conferees, and it will be up for a vote in Congress next week.
Posted 1 week ago on June 24, 2010
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