Supporters of the so-called carried interest tax break quickly struck back on Wednesday at GOP candidate Jeb Bush’s proposal to roll back the provision’s preferential tax treatment.
Advocates for private equity, one of the biggest beneficiaries of the current set-up, said Bush’s plan “would discourage growth and investment.”
{mosads}Private equity and hedge fund managers currently can count profits from money management as capital gains for tax purposes. Bush proposed taxing those profits as ordinary income, which faces a far higher top rate.
“Tax law has always recognized that carried interest realized in the sale of a capital asset is a capital gain. This is part of the American principle that we incentivize the entrepreneurial risk taking required to start, save, and grow businesses,” said James Maloney of the Private Equity Growth Capital Council.
“Instead of increasing taxes on private equity, venture capital, and real estate investment, it is our hope that as the debate over tax reform unfolds, Presidential candidates will utilize the opportunity to encourage, not undermine, long-term investment in the United States.”
Democrats have long called for scrapping the preferential tax treatment for carried interest and hammered the GOP’s 2012 nominee, Mitt Romney, over the issue. Polls for years have found that voters want higher taxes on the wealthy, and Democrats have pointed to carried interest as they made a broader populist case to battle income inequality.
The current GOP front-runner, businessman Donald Trump, has suggested for weeks that those on Wall Street aren’t paying enough in taxes, a populist message that has also gained traction.
But other conservative fiscal analysts joined the private equity lobby in chiding Bush over his carried interest proposal, even as they found much to like in the former Florida governor’s proposal.
“No Republican should be for higher taxes on capital gains,” said Grover Norquist’s Americans for Tax Reform.