Investment fund managers face stiff congressional tax

by John Dimsdale

Right now, income earned by managers of private equity or real estate investment funds is taxed as capital gains, which means 15 percent. Ordinary income is taxed at as much as 39 percent for those in the highest brackets. Treating investment managers’ take as ordinary income would bring in $18 billion to help pay for unemployment benefits. “We see this more as closing a loophole and having investment fund managers pay the same tax rate as similarly situated workers,” says Nicole Tichon at USPIRG.

But equity fund managers say the higher taxes will hurt the economy. “This is designed to cut the ability of venture capital groups to put together the money that you need for researchers or inventors who are creating jobs.” says Missouri’s Republican Senator Christopher Bond.

Supporters of the tax change say the fact that the bill has a good chance of passing this year shows how investment bankers have lost political clout since the financial crisis.