Taxing problem
(
)
Private-equity titans better get out their checkbooks — it looks like the tax man is going to be looking for a little more next year.
After beating back attempts in Congress in three of the past four years to raise the 15 percent tax rate on PE commissions, buyout firms now expect to lose that battle as lawmakers scramble for revenues to close a massive budget shortfall, two partners at large PE firms told The Post.
“There is no way a Paul Ryan [2012 fiscal] budget will pass [with all its spending cuts] without modest revenue enhancements,” said one of those partners, referring to the House Budget Committee chairman.
Industry lobbyists, he said, have told him they think it is “very likely” carried interest will become part of the mix.
“What easier target is there?” he said.
The 15 percent tax on commissions, the so-called carried interest rate, has been a hot-button topic for years — both on Wall Street and Capitol Hill.
That rate is much lower than the top 35 percent rate on ordinary income — even though carried interest has some ordinary income aspects to it.
Previously, the Democratic-controlled House of Representatives tried but failed to increase carried interest to 35 percent. The House last year passed a bill that would have raised carried interest, generating $18 billion in new tax revenue over 10 years — but the measure stalled in the Senate.
For one such PE giant, KKR, which earned roughly $600 million of its $2.1 billion in total income in 2010 from carried interest, a hike, to, say, 25 percent, would mean an extra $60 million due in taxes, one analyst estimated.
Rivals like Apollo Global Management and Blackstone, which invest less of their own money than KKR does, could see an even higher percentage tax hike.
In his budget speech yesterday, President Obama spoke strongly about the need to stop giving preferential treatment to the wealthiest Americans. Obama has already included the hike in his 2012 revenue proposals.