Can Obama make private equity pay?
The president wants to increase the tax burden for managing portfolios, but the political will to do so is weak.
With a huge round of spending cuts known as "the sequester" set to bite into both economic growth and job numbers, the president is scrambling to find other sources of income to offset the potential damage.
Fortunately for him and his Democratic cohorts in Congress, the hundreds of millions that private equity firms like Bain make from managing their clients' portfolios are taxed at only about a 20% capital gains rate for investment income rate rather than the 39.6% marginal tax rate.
That's going to cost the U.S. about $1.3 billion this year and $13.5 billion over the next decade, according to the Treasury Department. However, cinching the loophole -- which is more commonly known by the snore-inducing moniker "carried interest" -- is more lucrative politically than it is monetarily.
That reduced rate is a big sound-bite punching bag, especially after Romney admitted during his presidential campaign that it helped reduce his effective tax rate to 14% in 2010 and 2011. While lobbying to close the loophole, Warren Buffett declared that it helped reduce his tax rate to 11% -- which he told Forbes is less than that of his secretary. Back in 2007, the National Women's Law Center estimated that the loophole would save Blackstone Group CEO Stephen Schwarzman $135 million, or enough to fund Head Start educational services for 19,000 low-income children.
That sounds significant, but the $1.3 billion a year lost to that lower tax rate pales when compared to this year's $633 billion Defense Department budget. Democrats have supported boosting the levy on private equity firms, but they've also been looking for fights they can win.
With House Majority Leader John Boehner already drawing the line on tax increases after his party's fiscal cliff compromise, the battle to end "carried interest" faces an uphill climb. That doesn't mean a change in policy is impossible, especially with its primary beneficiaries refusing to keep their mouths shut.
Instead of sitting back, saying nothing and letting opposition to the private equity loophole die a slow, anonymous death in some subcommittee somewhere, Blackstone's Schwarzman went full Scrooge and invoked Godwin's Law to the first audience willing to listen.
"It’s a war," Schwarzman told the board of a nonprofit group in 2010, according to Newsweek. "It’s like when Hitler invaded Poland in 1939."
When that's the opposition, a win for Obama and company isn't beyond the realm of possibility.
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What the difference between Al Gore and Mitt Romney?
NOTHING, two mega rich guys building family dynasties trying to convince the working man that they care about you.
A true representation of our current political system.
Educate yourself and divorce yourself from Chris Mathews, you have Kool-Aid poisoning get help.
Al Gore sells out to a news agency that is owned by a Middle East oil conglomerate for half a billion after playing the environmental card for years . The Dems are not your salvation wake up fool both sides have sold America out for their own interests.
KCHALLENGER: If you can`t tell the difference between Al Gore and Mitt Romney you`re
too stupid to walk and chew gum at the same time.Go watch nascar.
So the logic is that since 13billion will not solve the problem then why tax those too big to fail, bailed out fat cats at all? Why not just tax the middle class to death and take away SS, medicare and all other saftey nets so that the wana be Royalty will not have to deal with a tax hike?
By that reasoning then the 35% in income and payroll taxes that I pay will have even less of an impact so why should I pay taxes?
For that matter why should a middle class person who actually works for a living pay taxes at a higher rate than Mitt whilte someone like Paris Hilton is to be excused from paying that same rate?
WHY IS HE STILL GOING AFTER MITT ROMEY? The Election is over.To bad ODUMA WON.
ODUMA is looking for ways to get more money, why doesn't he cut his pay and all of the POLITICIANS PAY, BONUSES, AND BIG FAT PENSIONS. How about cutting out all of the SECRET SERVICE BENEFITS for PAST PRESIDENTS or any politician. They made enough of the TAXPAYERS to pay for there own protection. When are all of these FREEBIES going to end.
WAKE UP AMERICA! TELL THEM YOU HAVE HAD ENOUGH!
Both parties are still focused on their personal agendas passing out kool-aid to everyone, but not focusing on Americas needs. Both sides are throwing up large smoke screens to keep people distracted from the upcoming financial collapse. IE. gun control, the deficit, immigration, Obama Care, tax the rich, entitlements, Gay rights, abortion, on and on. These are all important issues, but Americas house is on fire and both parties are arguing over the type of carpet we need. We have to put the fire out first, Jobs, Jobs Jobs but know one is focusing on most important issue. At this rate Americas house will be burnt down but we will have a real nice roll of carpeting sitting on the front lawn. We are in big trouble.
We`ll here plenty of hate from the far right on this article.They never have a solution of their own.
If Obama was 100% white his approval rating would be 70%.My sister is a server in an
upscale restaurant and lots of time servers will tell the kitchen staff "blacks are on table 3".
Their food gets spit on.Most of America are still racist.Obama has had 18 major accomplishments, but he won`t get credit because of race and the far right media.
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