Roger Lowenstein has a Bloomberg column taking aim at the tax laws for managers of partnerships:
Managers of private-equity funds, and of other investment partnerships, enjoy an undeserved exception. The performance fee they charge investors, typically 20 percent of profits, is treated as a capital gain and taxed at the lower rate. This makes no economic sense; an outside investor has the same incentive to participate regardless of the tax paid by the manager. It makes sense only if you are Henry Kravis and prefer to pay less.
The House of Representatives has voted three times to end this unwarranted privilege. After the financial crisis, the Senate seemed likely to concur. Then, industry lobbyists stormed Congress. The matter now rests with the Senate Finance Committee. Since nothing is more arbitrary than the proper rate at which to tax, the only sure principle is consistency: what one party pays, so should the other.
No great industry is at stake -- private equity is hardly the engine of job creation its flag-waving lobby maintains, and the industry will survive at any rate. The only principle at stake is fairness: billionaires should pay as much as everyone else.
Billionaires already do pay more than everyone else; we've got a "progressive" tax code in this country that taxes high income earners at higher rates than everyone else, and the top 1% pay about 40% of the income taxes while earning 20% of the income. And if it's fairness and consistency that is the goal, applying the same rate to long-term capital gains of investment managers and to that of owner-entrepreneurs like, say, Warren Buffett or Bill Gates would fit the bill — a long-term capital gain is a long-term capital gain. Not all of these investment managers are billionaires. Some jurisdictions don't tax capital gains at all. With the long term capital gains rate now at 15% and the top income tax rates, if you include state and local taxes, headed to 60%, these are huge tax increases. Mr. Lowenstein just assumes that the investment managers are going to roll over and pay them, rather than moving offshore or finding some other more tax-efficient way to structure their activities.
It's got to be frustrating to those investment managers plunking down tens of thousands of dollars a year for Bloomberg terminals to see the revenues they pay in used to argue that their taxes should be increased.