(February 2, 2010) — President Obama outlined his 2011 budget blueprint on Monday, asking hedge fund and private equity managers to handle a big chunk of the bill for his proposed $3.76 trillion budget.
The president’s plan would eliminate the so-called carried-interest loophole, which taxes fee income earned by alternative investments professionals as capital gains. Obama’s plan would tax performance fee as ordinary income, nearly tripling the amount some managers would pay and boosting the tax rate from 15% to typically the highest income bracket. According to the administration, the plan could raise $24 billion over a decade.
The plan passed in the House of Representatives, but its been blocked in Senate. Many lawmakers of both parties worry entrepreneurship and investment would be compromised by a tax increase on so-called carried interest. According to the
Wall Street Journal, supporters of the president’s plan say it’s unfair fund managers’ income should be taxed at a lower rate than wages.
Additionally, Obama has proposed ending tax cuts championed by President George W. Bush, raising taxes on families making more than $250,000 annually. This would increase the top income-tax bracket to 39.6% and would net nearly $1 trillion in new revenues for the struggling government.
Obama is looking for another $122 billion from banks and multinational corporations, and $37 billion more from oil and gas companies, reported FINalternatives.
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