Biden Cap Gains Tax
Bidens tax plan looks like it will 100% go through after them passing this COVID bill. In it is the provision to raise cap gains tax on long term capital gains to that of short term for >1M income. It seems like this is a very big deal in terms of future post tax returns for PE/VC/Index investing and thus capital flows. Obviously many of the investors in these funds are tax exempt but ~50% is still likely from taxed investors.
Tax rate goes from 23.4->43%
This will then lead to a decrease in AUM in these sectors and cause negative future capital flows as allocators pivot around these taxes, leading to lower compensation for these sectors and higher taxes on carry comp in some situations? Seems like it is a bigger deal to me than how most have been thinking about it.
Am curious about what others think. I imagine the impact on personal taxes matter, but the bigger impact is the change in how allocators view these asset classes?
it has to be one of the most fucked shits about his tax plan.
Could stomach having my ordinary income tax raised back to obama-era levels but seriously? Getting rid of cap gains for sales > 1 mil? what in the actual
God I fucking hate Democrat tax policies. Always trash like this. When will they learn?
Dont think it will have any notable impacts on capital flows but of course, it will have a hugely detrimental impact on carried interest dollars. Your typical PE fund is set up in a tax exempt domicile anyway and all cash flows that move through are tax free. Tax is then charged at the LP level and even there it will likely only have an impact of family offices and HNWIs, which compared to pension funds, endowments, foundations, SWFs make a substantially smaller portion of most institutional funds.
It won’t pass.
I agree this provision might get removed, but the bill passes 100% through budget reconciliation.
Is there a limit on how many times they can use budget reconciliation?
This would happen no matter where these investors put their money, right? So it shouldn't impact flows distribution since your net yield across all possible investment opportunities is impacted equally.
Yes but would tend to increase allocations to short term HFs and active HF managers compared to PE IMO, which is an asset class that has not done nearly as good as PE, in large part due to the current tax benefits to being a LT investor rn.
This is my post despite change in "role" on my profile, think this aged well lol
Curious if anyone has other thoughts now so bumping it.
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