Obama Calls For Carried-Interest Tax Hike

Feb 4 2013 | 1:56pm ET

President Barack Obama yesterday took advantage of a televised spot before the Super Bowl to push for higher taxes on alternative investment fund managers.

The president, who on New Year's Day won a tax hike on the highest-earning Americans, said he's through seeking higher tax rates. But he said, countering Republicans, that the U.S. still needs to raise more money, in addition to cutting spending.

"I don't think the issue right now is raising rates," Obama said. "There is no doubt we need additional revenue, coupled with smart spending reductions in order to bring down our deficit. And we can do it in a gradual way so that it doesn't have a huge impact."

Obama specifically said he would seek to close the so-called "carried interest" loophole, while allows hedge fund and private equity managers to pay only the capital-gains rate on their performance fee income. It's not the first time that Democrats have sought to end that practice; they have repeatedly failed in the face of Republican opposition.

Capital-gains rates for the wealthiest Americans have already increased from 15% to 20%, but that is still far below the top earned-income rate of 39.6%.

"Given the 58% increase in taxes paid on capital gains as part of the recent deal to avert the fiscal cliff, it is our hope that any tax reform effort in 2013 will be about crafting policies that incentivize economic growth," Steve Judge, head of the Private Equity Growth Capital Council, said.

Of course, it's unclear how much weight people like Judge now have with the White House. Whereas hedge fund managers overwhelmingly supported the president in his first run for the White House in 2008, they turned against him last year, backing former private-equity executive Mitt Romney against him in November, in part due to Obama's push for higher taxes on the industry.


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