Capital gains tax hike


Seeing no discussion of the tax hike on here and I'm surprised. If it goes through, it's gonna be very ugly for this board -- layoffs, leaving the industry, etc.


First order approximation, carry pool will decrease by 25% & junior salaries will decrease by more than that.


But it's not just carried interest that is taxed at capital gains -- it's also the LPs that are going to have to pay an extra 20%. That's going to have ripple effects. You will see outflows from US investment managers.


Fortunately, some LPs are tax exempt, but many are not. So you will see smaller AUM pools, again leading to lower management fees, leaner teams, etc.


Obviously, materially no one here is going to starve, but you have to marvel at the stupidity for the US economy -- will lower economically beneficial long term investment in technology for example and incentivize selfish spending on yachts etc. by ultra rich. Not to mention distortions in the markets like being locked into investments to avoid cap gains tax. You will see more Teslas and bitcoin bubbles. Yuck.


I'm not even a conservative. To the extent that inequality is a priority, it can be solved in less distortionary ways like a global wealth tax.

 

Idk who’s throwing MS, it’s a great point of discussion regardless of what side of the aisle you’re on.

I’m hoping the current “proposal” is just negotiating and we’ll get something more reasonable.

 

Can PE firms cut comp by more than 25% and still lure talent from IB?

 

Not sure that's entirely accurate. An associate at an EB makes a pretty similar amount to most PE associates. In addition, a lot of UMM and MF PE associates actually work the same or more hours than their IB counterparts

 

I think a global wealth tax is a good idea and is necessary if we are to combat wealth inequality (which we definitely should). I'm sure you have heard about the top 1% owning more than the bottom.

I don't agree with the implementation though. For instance, the tax should apply to yearly capital gains regardless of if you sell or not. It should apply to all asset classes (public equity, pe, real estate, etc.), no rebate. Also, yearly capital gains under a certain level (eg. $1M) should be tax exempt.

 
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