Fiscal Cliff Negotiations Leave Hedge Fund Tax Loophole Unscathed
January 2, 2012
Common ground is hard to come by in Washington these days, but everyone, it seems, hates tax “loopholes.” Democrats claim they rob the government of revenue and benefit the rich. Republicans say tax loopholes distort free markets by letting the government pick winners and losers, thereby potentially introducing artificial and undesirable incentives.
Indeed, during the 2012 presidential race, Republican vice presidential nominee Paul Ryan attacked tax loopholes for the rich, declaring that he and Gov. Mitt Romney wanted to “get rid of special interest loopholes and deductions that are uniquely enjoyed by the wealthy.”
So what about the so-called “carried interest tax loophole”? That’s the provision that allows hedge fund managers and investment firm executives to have the profits from the sale of a company taxed at the capital gains rate (soon likely to rise to 20%) instead of the traditional income tax rate (soon likely to jump to 39.6% for top earners).