Corporate America along with every man, woman, and child better be prepared to live under a much costlier tax regime within the next few years, especially if a Democrat wins the White House in 2008. Every day it seems the Democrats (and some Republicans) are calling for new and higher taxes on everything and anything. Don't be surprised if they implement a tax on the air you breathe.
For example, the House Ways and Means Committee just last week passed a proposed bill that would change the tax status of "carried interest" - part of the compensation the general partner receives in various partnership structures. If made law, income would be taxed as ordinary income rather than capital gains - 35% versus 15%.
In a recent study released by the Real Estate Roundtable, there are some 2.5 million partnerships in the United States managing $13.6 trillion dollars in assets, changing the tax treatment of carried interest would result in a tax increase of $13 billion annually.
I don't know if it's arrogance or greed, but politicians must be kidding themselves if they think the law will bring that much revenue into government coffers. It will only change investors', particularly those who acted as general partners, behavior by participating in other parts of the economy. Real estate, private equity, hedge funds, and other entities that use partnership structures will no doubt be impacted and probably move overseas, taking jobs and capital with them.
Let's hear it for Washington D.C.!!!
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