New Carried Interest Study Struggles To Explain Itself
The Senate today takes up the carried interest taxation issue, which means it's time for another industry study about how increasing taxes on PE partnerships will cost the nation fortune and jobs (last part emphasized, since the relevant legislative language is part of a jobs bill). This one comes from the Private Equity Council, which argues that each "one percentage point increase in the effective tax rate on private equity investment is associated with a $1.8 billion decline in annual private equity investment." The study (download here) claims to have "detrended" macro-economic changes, in order to make tax rate changes the most significant variable. It also emphasizes that those $1.8 billion decreases are relative to expected private equity ebbs and flows (i.e., it does not necessarily mean that a 1% change today results in a $1.8b decrease from current levels -- but rather a $1.8b decrease from what the level otherwise would be).
