https://www.axios.com/2022/07/27/manchin-reconcil…
Carried interest to be taxed at same rate as regular income per Manchin agreement w/ Schumer.
Wow. Could have interesting effect.
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Fuckkkkkk Brandonnnnn
a lot of Finance folks voted for this clown, so it's only fair
Not a Brandon fan but would still vote for him again over the maga clown ass that started his presidency blatantly lying that he had the biggest inauguration ever and ended it trying to overturn an election he got destroyed in. Not everything is about shareholder value and I’m not necessarily convinced based on history that one party or the other has done a unequivocally better job at managing the economy than the other.
Mixed feelings on this. Have a decent carry allocation at my current role but recognize the inherent unfairness in the tax treatment of carried interest.
Same. Annoying to have to pay more in taxes but recognize that this really should’ve been done away with years ago.
If you think its unfair, you're more than welcome to pay in extra to the IRS. I'd prefer to take the lower tax rate thanks.
..
So your solution to “unfairness” is to feed more money into our bloated government so that they can co your to allocate capital poorly? Hmm
Only half gone. Besides if you stick with this job for a career you’ll still be unethically disgustingly excessively rich even with the change.
Such a joke. It’s literally payment as part of a capital gain. If capital gains are taxed less then carry should be taxed less. What an absolute joke. I hope the structuring geniuses can figure something out.
It is functionally a fee for management services provided. Capital gains are taxed lower than income because they come with risk of losing your investment. The GP commitment is treated as capital gains, as it should since it's an investment the GP made with its own risk. The 20% performance fee doesn't come with any principal risk and should be taxed as ordinary income.
If investment banking fees (which scale higher the better outcome your client receives) are taxed as ordinary income, then management fees should be as well.
I think principal risk is just one piece of it the carry is proportional to capital gain generated and so imo it should be taxed as such. I’m sure the structuring geniuses will figure something out. We put blood sweat and tears into the job fuck this. Lol at functionally a fee also, what??
good. all the limousine liberal nyc PE types deserve this for propping up democrats in elections.
you get what you vote for.
I know this sounds like a good talking point but Obama and Trump all advocated changing the treatment
And Republicans didn’t do high earners in blue states any favors with the SALT cap
Interesting, why wouldn't private equity funds just set up a holding company that owns the GP's interests and issue share-based compensation proportionally for that holding company?
No one does more to avoid paying taxes than the ultra wealthy and there's no logical, unbiased reason that this loophole shouldn't be closed.
You guys wonder why so many people on both sides of the aisle hate the bankers and ultra rich in this country? Look at these reactions.
Rules for thee but not for me...
Agreed. This thread is fucking pathetic. A part of me is sad that I will be making less money if this goes through. Another part of me recognizes that I am making 8 figures when my carry comes in, I frankly do not need this much money, and it could be better allocated to other people. I am inherently greedy, just like everyone else, and that is why I was not voluntarily donating it to charity. That is why this is necessary. A big talking point on this forum is how democrats only hurt poor people and not wealthy people (???). But here ya go. This exclusively targets wealthy people. No sane person outside of PE will tell you the current loophole is fair. NOBODY. I love the outrage from college students who aren't even affected by this. If you make it to principal, you will still have far too much money to know what to do with. Don't worry.
I'm a bit torn on this one, to be honest. My first reaction, as a LMM guy, was that *I* and the fund I work for create value in a way that is distinct from how megacap and even larger mid-market shops do, so my end of the market should be exempt (main character bias, obviously). I also had the knee-jerk reaction that they should be targeting public equities carry before coming after the private markets (kinda similar to first reaction on LMM vs. larger). On balance, there is no real reason for this tax treatment to exist for the vast majority of folks, as Alt-Ctr-Left says above.
I do wonder whether more favorable levered coinvestment terms will start to come to the forefront to help solve for some of the decreased take-home. I would imagine that for future funds, GPs might ask LPs for more favorable terms so that the GP can provide higher levels low-cost leverage at higher levels than is currently market.
Someone smarter (@APAE) probably has a more nuanced take than my crayon scribbles above.
Obviously as finance guys none of us hate to see the deck stacked in our favor. But frankly, we'll be fine without it and probably don't deserve it.
My one wish is that they allowed the carried interest loophole to still apply to individuals building wealth (Below a HH net worth threshold in the millions). I still think there's a valid rationale to give tax advantages that encourage wealth building & investment from people trying to build their nest egg.