Obama Budget Would Boost Hedge Fund, P.E. Taxes

Feb 1 2010 | 2:15pm ET

President Barack Obama is asking hedge fund and private equity managers to foot a big chunk of the bill for his proposed $3.76 trillion budget.

The president’s plan would eliminate the so-called carried-interest loophole, which taxes fee income earned by alternative investments professionals as capital gains, rather than ordinary income. The Obama plan would tax performance fee income as ordinary income, nearly tripling the amount some managers will pay. The provision would add $24 billion to the government’s coffers over the next 10 years.

The fiscal year 2011 budget also includes several other tax provisions likely to hit the alternative investments industry hard. Obama has proposed allowing the tax cuts on wealthy Americans pushed through by President George W. Bush to expire, increasing the top income-tax bracket to 39.6%. That would net nearly $1 trillion in new revenues for the government as it struggles to both prop up the U.S.’s ailing economy and cut its ballooning deficit.

Obama is also seeking an additional $122 billion from banks and multinational corporations, and $37 billion more from oil and gas companies.

The president has proposed cutting the budgets of five cabinet departments, while pouring $76 billion into a new jobs-creation program and $25.5 billion into state government coffers.

A further bitter pill for the alternative investments business is that their higher tax burden will help boost funding for the Securities and Exchange Commission by 11%. Obama wants to boost the agency’s budget from $1.11 billion to $1.23 billion to allow it to “address increasingly complex financial products and transactions.” The president’s budget would also boost the Commodity Futures Trading Commission’s budget by 55% to $261 million.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.