Bush Blasts Tax Hike On Fund Managers

Jul 12 2007 | 12:44pm ET

The Bush administration has come out against raising taxes on private equity firms, hedge funds and their managers, warning that it could undermine “entrepreneurship.”

At yesterday’s Senate Finance Committee hearing on the issue, Eric Solomon, assistant Treasury secretary for tax policy, urged Congress to “be cautious about making significant changes” to partnership and capital gains tax rules that have “worked successfully to promote and support entrepreneurship for many decades.”

The panel’s top-ranking Democrat and Republican, Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) are co-sponsoring legislation that would more than double the tax rate on certain partnerships—like p.e. firms—that go public. Meanwhile, in the House of Representatives, Democrats are pushing a bill that would do the same to “carried interest,” investment gains made by fund managers.

Still, the prospects for success did not look good at the hearing, with three key Democrats—Sens. John Kerry (D-Mass.), Ron Wyden (D-Ore.) and Charles Schumer (D-N.Y.)—expressing reservations, and many committee Republicans publicly opposing the measure.

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