Carried Interest: Let’s Preserve at Least Some of the Pro-Growth in the Tax Plan

Seton Motley | Less Government |
Let’s Treat It Like
We Know We Need It –
Which We Desperately Do

The old saw is: A fool and his money are soon parted.

Except when it comes to the government and its tax code. Then – its the smart people that get royally job-ed.

The Left is so eminently interested in everything being “fair.” Which is why they are mostly responsible for a current tax code – that takes nearly half of all federal income tax coin…from just 1% of the nation’s population.

1% of the population paying half of all income taxes is a “fair share” – in Bizarro World. The math doesn’t work here in Reality.

Another aspect of the Left’s War on Success – is their loathing of the way we currently tax carried interest. Shocker – the Left wants to raise the rates.

Which is a titanically stupid thing to do – if you want our nation to maintain any modicum of success. Which of course the Left does not.

What is carried interest?:

“It’s not a deduction, it’s not a loophole, and it’s not a provision. Rather, it’s a type of capital gain.

“Specifically, it’s a capital gain earned by an investment partnership. Even more specifically, it’s a capital gain earned by an investment partnership as allocated to the managing partner (as opposed to the limited partners).

“That’s it. It’s so simple, even political reporters from the New York Times could understand it.

“It’s not compensation. It’s not a write-off. It’s not anything other than simply and obviously what it is–a long-term capital gain, earned by an investment partnership, derived from the sale of an asset the partnership built and managed and grew.

“That’s all. No one who knows the first thing about taxes disputes that it’s the capital gain from the sale of an asset.”

We currently tax this capital gain – as a lower-rate capital gain. The Left wants to tax this capital gain – as regular income, at the dramatically higher regular income tax rate.

The Left says they want us to save for our future. The Left’s actions, again and again, clearly demonstrate that they do not want us to save for our future. Taxing these investments as income – is the Left screaming at us not to save for our future.

Carried interest isn’t a salary – it is a return on investment. And investment – carries risk. Exponentially more risk than is involved in cashing a paycheck.

Because not everything in which you invest is a winner – and returns you a windfall. (Anyone care to purchase some Tower Records stock? How about MySpace?)

So the government rightly taxes carried interest at a lower rate – as an acknowledgment of the higher risk.

The government also taxes carried interest at a lower rate – as an acknowledgement of the absolute necessity of investment money to the broader economy.

On the other side of the carried interest coin – are small business owners, and people looking to be small business owners. These people need investment coin – to establish and grow their businesses, and to hire (more) people.

Because that’s how the economy grows.

The Left looks to screw the carried interest “fat cats” – which screws (very much worse) the very many skinny cats that need the “fat cats’” cash to grow their tiny little slices of the American economy.

Which, collectively, grows the entirety of the American economy. For everyone.

Now, let the record reflect that it isn’t just the Left that doesn’t get the lower carried interest tax rate. Now-President Donald Trump and his former advisor Steve Bannon both also wanted to tax this capital gain as regular income. No bueno.

Which brings us to now. We are currently in the midst of watching Washington, D.C. try to reform the heinous, horrendous tax code they have foisted upon us.

During which the Left has been working to make the current, lower carried interest tax rate – a casualty in their War on Success.

President Trump has been doing what he has thus far nigh always done while the Legislative Branch is drafting legislation – left them alone to do their thing.

Given the lack of spinal fortitude in so many members of the DC GOP – things could have been looking fairly awful for carried interest, Reality and our economy.

But thankfully, a reasonable House compromise on the rate has been reached. A compromise – of which Bannon wisely, thankfully approves:

“I have long called for the elimination of the carried interest loophole but I believe that the proposal in the House tax bill requiring investments be held for a minimum of 3 years to qualify for capital gains is a good way of eliminating short-term financial engineering that benefits no one, while encouraging long-term investments that create good paying jobs.”

Here’s hoping President Trump will agree with Bannon. And that the compromise (or something even better) makes it through the legislative process and into the final bill – which the President will then happily sign.

Math, Reality and our economy – will all benefit as a result.

This first appeared in Red State.

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