As you may already know, H.R. 4213, the tax extenders bill (which passed the House with Senate amendments last week), would counteract temporary relief to taxpayers by entrenching several new tax hikes into permanent law. One example is the tax on carried interest, which would prohibit investment managers from paying capital gains tax rates on services income received as carried interest. This would stifle the entrepreneurial spirit we need in this dismal economic climate. The Wall Street Journal recently did a piece on the carried interest tax.
Here are a few excerpts:
"The term carried interest refers to tax provisions that have been used for years by partnership organizers to convert their own pay from ordinary income into capital gains. At current rates, that meant their compensation often qualified for a top tax of 15%, versus the 35% income tax for high-earning workers. In order to raise revenue for extending jobless benefits and renewing a host of expired breaks for businesses and individuals, the House voted yesterday to curtail the benefit to those who organize, advise, and manage investment partnerships."
"The bill, known as the American Jobs and Closing Tax Loopholes Act of 2010, is the latest version of a proposal first drafted by House Ways and Means Chairman Sander Levin (D., Mich.) and Senate Finance Chairman Max Baucus (D., Mont.). It would subject 75% of the partnership organizers' profits to the higher tax rates starting in 2013, and 50% to the higher rates until then."
I suggest you check it out! It explains the tax in much greater detail so investors know whether or not they will be affected...and by how much.
Additionally, we distributed a vote alert in opposition to the tax extenders bill, which contains a net increase of $40 billion. The Senate will take up the bill after the Memorial Day recess.