Private Equity Lobbying on Tax Status
The recent media emphasis on Romney’s tax rate and emerging opposition has caused large companies to take a defensive stance.
The election-year focus on candidate Mitt Romney’s tax returns has drawn new attention to the carried interest tax break—a special tax treatment that helped drop the presidential candidate’s 2010 effective tax rate below 14 percent.
Now it turns out that the largest U.S. private-equity funds and venture capital firms have embarked on a multimillion-dollar lobbying efforts to protect the carried interest tax break, reports Businessweek.
“If anything preserves the status quo, it will be the very heavy lobbying campaign,” said Edward Kleinbard, a law professor at the University of Southern California to Bloomberg, regarding the carried interest tax break. “There’s no other reason for the subsidy to survive.”
Carried interest is a form of profits-based compensation—where investors “get a portion of their clients’ earnings as investment income if the underlying earnings are treated that way,” Businessweek explains. The current debate centers on whether carried interest should be taxed at the capital gains rate of 15 percent or if the rate should be taxed at higher ordinary income rates, which could be as high as 35 percent.
Companies have been hiring lobbyists to help fight changes to the tax treatment of carried interest and have been spending large sums of money to keep the current tax rate so low, reports Bloomberg. Blackstone Group alone spent $5 million last year lobbying Congress, on issues including carried interest tax treatment, Businessweek reports.–Abby Tracy
Photo via Robert Huffstutter
