Carried interest has been under attack from both Republicans and Democrats, though the financial industry has successfully blunted efforts to remove it.
Three Senate Democrats, including key moderate Joe Manchin, expressed support for the Biden administration’s proposal to end a long-standing tax break beloved by Wall Street.
ADVERTISEMENT Currently, there is a loophole in our tax code that allows investment managers to pay less taxes for wage income than the ordinary West Virginian and American worker. This legislation would close this loophole to ensure wealthy hedge fund managers are paying the fair amount in taxes, Manchin said in a statement. I urge my colleagues on both sides of the aisle to support this commonsense legislation that treats all workers fairly.”
The introduction of the bill comes after Biden proposed in his American Families Plan to do away with the carried-interest preference. Biden also proposed raising both the top ordinary income tax rate and the top capital gains rate to 39.6 percent for high-income taxpayers. Biden is proposing to use the revenue raised from these tax increases to pay for spending in areas such as child care and education.
Private Equity Firms Are Piling On Debt to Pay Dividends
Dividend recaps, a kind of borrowing long condemned for loading up companies with debt for the benefit of their private equity owners, has surged.
Using borrowed money, the Blackstone Group of New York got about $200 million in dividends out of a company it controls, in a transaction called a dividend recapitalization.Credit.Bloomberg
Feb. 19, 2021
The initial public offering of Apria Healthcare last week was a $170 million boon to Blackstone Group, the private equity firm that is Apria’s majority owner.
But as lucrative as that payday was, it wasn’t as good as the one Blackstone extracted from the company just a few weeks earlier: about $200 million in dividends, paid with borrowed cash.
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