The largest U.S. private-equity funds and venture capital firms have relied on a five-year, multimillion-dollar lobbying campaign to protect the carried interest tax break that helped drive presidential candidate Mitt Romney’s 2010 effective tax rate below 14 percent.
With the issue gaining attention in this year’s U.S. presidential election campaign, the investment industry is again girding to defend its preferential tax treatment. Blackstone Group LP alone spent $5 million in 2011 lobbying Congress on issues including the tax treatment of carried interest.
“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. “There’s no other reason for the subsidy to survive.”
Opponents of the tax rate for carried interest see this as an opportunity to press for change. Romney released his 2010 tax returns on Jan. 24, revealing he paid an effective tax rate of 13.9 percent on income of $21.6 million.
Romney, a former Republican governor of Massachusetts and co-founder of Bain Capital LLC, has come to personify the debate over whether the carried interest paid to private-equity managers should be taxed at the capital gains rate of 15 percent while ordinary income is taxed at rates as high as 35 percent.
Yes, we've got the tax system we do because of intensive lobbying, and because we've let money become absolutely critical in political campaigns. And of course these people are going to lobby fiercely to protect their privileges. What's new, huh?
But I note this article primarily because of this:
Democrats view the carried interest issue as an element of the tax fairness theme that President Barack Obama is highlighting in his re-election campaign. Representative Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, plans to introduce a bill as soon as this week that would tax carried interest at the same rate as regular income, according to spokesman Josh Drobnyk. The bill probably won’t advance in the Republican-controlled chamber this year. ...
The last time the Senate considered a bill that would have increased taxes on carried interest -- in June 2010 -- every Republican voted against it, preventing the bill from advancing. Senator Ben Nelson of Nebraska was the only Democrat to oppose the legislation.
Yeah, that's my senator. On the bright side, he's retiring after this year. Unfortunately, he's very, very likely to be replaced by a Republican who's even worse than he is. Just as in the presidential campaign, all four Republicans currently running for the Senate in Nebraska are competing over which one is furthest to the right.
Yeah, in the Republican Party these days, "moderate" is a dirty word - almost as dirty as "compromise." You quite literally can't be too crazy for the GOP these days. The sky's the limit.
But it's also clear that, although the Democrats are far from perfect, there's really no comparison between the parties. Ben Nelson might be nearly indistinguishable from a Republican, but he's an atypical Democrat.
Both political parties are not the same, not even close. And this carried interest tax benefit is just one example of that.