Bloomberg News has an article quoting Senator Schumer saying that a more than 100% increase in the tax rate on "carried interest" on long term investment earned by managers of investment partnerships, including venture capital, private equity, real estate, and hedge funds, is "one of the things being considered" by the Senate. We've been covering the issue extensively here. Says the Bloomberg article:
In February, Treasury Secretary Timothy F. Geithner told the Senate Budget Committee the administration would push the tax increase and also encourage the U.K. to adopt a similar policy.
"Even though the measure doesn't produce a lot of revenue, it's good economic policy," Geithner said at the time. Investment managers shouldn't be paying less in taxes than firefighters, he said.
The firefighter comparison confuses the issue: Under the current system, firefighers pay the same 15% rate on long-term capital gains as investment managers do. What the proposed change would do would tax the long-term rates on capital gains of investment managers' carried interest at higher rates than everyone else's long term gains. The text of the legislation even acknowledges as much, referring to "Special rules for partners providing investment management services to partnership."
A FutureOfCapitalism.com writes to wonder why, if it doesn't produce a lot of revenue, this "fairness" issue is being discovered now, after about 50 years of tax policy, and to suggest the measure is being pushed by those, such as Warren Buffett and the big Wall Street banks, who compete with hedge funds, venture capital, and private equity for talent, deals, and capital. Otherwise, why fiddle around with this in the middle of a difficult economy, with high unemployment and needs for investment, especially to raise little money?