John Snow, former US Treasury Secretary and current chairman of Cerberus Capital Management, has spoken out against proposed legislation that would increase the rate at which carried interest is taxed.
Speaking at a National Press Club luncheon on Wednesday, Snow warned against the risks and potential side effects of treating carried interest as ordinary income rather than as capital gains. A bill introduced by House Representative Sander Levin aims to do just that, and would increase the tax on carry to 35 percent from 15 percent.
“If what’s being earned is ordinary income, it should be taxed as ordinary income … what is risk returns is returned capital and should be taxed at capital gains,” Snow said, according to Reuters.
He also said a Senate bill that would cause publicly traded partnerships to be taxed as corporations, dubbed “The Blackstone Bill”, could be detrimental and affect numerous industries and small businesses aside from alternative asset managers.
“If you reduce taxes on capital, you get more capital. More capital has a beneficial effect on the economy as a whole,” Snow said. “If you tax it more heavily, you get less of it.”
Snow is the latest public figure to join the carried interest debate, which has been sparked by a flurry of committee interest on Capitol Hill. Last week, following the Senate Finance Committee’s first hearing on carried interest, Democratic presidential candidates Hillary Clinton and John Edwards issued statements in support of treating carry as ordinary income.