CONTACTS: John Reid/Karen Gaither
(202) 463-5682 / 888-249-NEWS

 

November 1, 2007  

 

WASHINGTON, D.C.-The U.S. Chamber of Commerce today expressed its opposition to any tax increase on the general partner's share of a limited partnership's profits, known as "carried interest."  Advocates of this tax increase say it will only impact a few of the richest members of society; however, a closer analysis shows that it stands to impact over 15.5 million individuals who are invested in 2.5 million partnerships. The House Ways and Means Committee is expected to mark-up and vote on "carried interest" legislation today.     
  
"This provision has been sold as something narrowly tailored to large private equity and hedge fund executives which is simply not true," said Bruce Josten, Chamber's executive vice president of Government Affairs.  "The fact is, this change is a direct assault on over 2.5 million partnerships and would fundamentally alter capital formation in the United States.  The partnerships structure has been a resounding success and helped drive the creation of such economic powerhouses like EBay and Google.

 

Carried interest is a core element of partnership finance in every sector of the U.S. economy engaged in capital formation, including real estate, private equity, healthcare, retail as well as some hedge funds. Raising the cost of doing business with these entities would make the capital markets less efficient at a time when the U.S. is facing fierce international competition for investment capital. 
 
"This structure was created decades ago as a flexible investment vehicle to bring together investors with different skills and assets," said Josten.  "The carried interest proposal amounts to an entrepreneurship tax on American investors.  In its drive to follow paygo rules, Congress cannot ignore the impact this change would have on the economy as a whole."
 
Carried interest is currently taxed at a blended rate depending on the nature of the income.  As for individuals, long-term capital assets and dividends are taxed at 15%; short-term investments and manage fee income are taxed at rates up to 35%.  Hedge funds most of whom mainly deal with short-term investment taxed at 35%; whereas, real estate, which makes up the largest percentage of partnerships, is more likely to hold buildings and other long-term capital assets.

 

The U.S. Chamber is the world's largest business federation, representing more than three million businesses and organizations of every size, sector, and region.

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