Democratic presidential candidate Hillary Clinton has called the taxing of carry as capital gains “a glaring inequity” that she would remedy if elected.
“It offends our values as a nation when an investment manager making $50 million can pay a lower tax rate on her earned income than a teacher making $50,000 pays on her income,” Clinton said at a rally in Keene, New Hampshire.
The carry earned by “some multimillionaire Wall Street managers” should be taxed as ordinary income at 35 percent, not as capital gains at 15 percent, she said.
“Don’t get me wrong, private equity and venture capital play important roles in our economy, and we should continue to support the entrepreneurial spirit that makes America great,” she said. “We can close this loophole that benefits some of the best-paid people in America, while continuing to encourage investment in innovative, young companies.”
The estimated $4 billion to $6 billion in tax that may result from an increased tax on carried interest, Clinton said, could be used to help middle class and working families.
Much of the same language was heard earlier this week by fellow Democratic candidate John Edwards.
“A tax code that lets hedge fund and private equity managers making hundreds of millions a year pay taxes at a lower rate than their secretaries is wrong,” Edwards said in a statement. “Carried interest is compensation for work, and it should be taxed like other pay.”
Edwards applauded House Representative Sander Levin for introducing a bill that will “end this abuse” of taxing carry as capital gains.
Billionaire investor Warren Buffett, The Washington Post, The New York Times and the Service Employees International Union are among those supporting GP tax reform.
The issue is being examined in numerous Congressional hearings this summer, as is as the tax treatment of publicly traded partnerships like Fortress and The Blackstone Group.
Senate Finance chair Max Baucus, a Democrat from Montana, and ranking committee member Charles Grassely, a Republican from Iowa, have authored a bill that would cause such partnerships to be taxed at the higher corporation rate.
“I congratulate Senators Baucus and Grassley for introducing a bill to close another loophole that lets publicly traded hedge funds and private equity funds avoid corporate taxes,” Edwards said.