It looks like the industry can breathe a sigh of relief as the fears about a rise in the rate of taxation of carried interest will not come to fruition.
It's possible the push could be revived. But for now the industry won't face what many thought would be a doomsday scenario.
Reid will probably fail again, since his own party's Sen. Ben Nelson (D-Neb.) has joined the Republican opposition against this tax hike bill. Republicans will probably block any tax hike. Sen. Nelson specifically said he does not want the carried interest repeal on real estate partnerships, which are a big factor in every state, unlike like hedge funds, private equity and venture capital funds concentrated in New York, California, Illinois, Massachusetts and other larger states. (Sen. Nelson is winning back stripes after his infamous Cornhusker-kickback health care deal.)Repealing carried interest is losing appeal as more and more leaders oppose its consequences, unintended or otherwise. It's a growth killer in this weak economy and it's un-American to tax small businesses with ordinary income after their lifetime of hard work to build up their business with risk capital. These entrepreneurs, including investment managers, deserve capital gains when appropriate. And remember, often times carried interest is ordinary income too.
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