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Here at Dealbreaker, we’re not taking the proposed sort-of death of the carried interest loophole seriously. For one, long experience tells us it will not happen. For another, the delicate Senate math also tells us it will not happen.

We’re guessing the hedge and private equity fund managers targeted by the measure aren’t particularly concerned, either, for the same reasons. Still, one of the factors in their success at preserving such an obviously unjust and exceedingly unpopular tax loophole for the very, very rich is to at least go through the motions to defend it. And so allow them to explain why charging billionaires a lower tax rate than their secretaries and landscapers is actually a really good thing.

"Over 74% of private equity investment went to small businesses last year. As small business owners face rising costs and our economy faces serious headwinds, Washington should not move forward with a new tax on the private capital that is helping local employers survive and grow," Drew Maloney, president and chief executive of the American Investment Council…. "It is crucial Congress avoids proposals that harm the ability of pensions, foundations, and endowments to benefit from high value, long-term investments that create opportunity for millions of Americans," said Bryan Corbett, MFA president and CEO.

Alas, this threat that all of the alternative investment managers will simply stop doing those things and fuck off to Galt’s Gulch is being undermined by those managers’ least favorite colleague, the maverick and voluble Bill Ackman, who calls bullshit on the whole very-easy-to-call-bullshit-on thing.

“The carried interest loophole is a stain on the tax code,” Ackman said in a Thursday tweet…. “The daily activity of investment management does not need the additional incentive of lower carried interest taxation to drive behavior,” he said. “Put simply, there should be no difference in the tax rate on the management fee income investment managers receive compared to the incentive fees they receive as they are simply fees in various forms…They don’t need the extra boost from lower rates to motivate them to work better or harder for their clients. The fees are sufficient to motivate their behavior….”

“It does not help small businesses, pension funds, other investors in hedge funds or private equity, and everyone in the industry knows it. It is an embarrassment, and it should end now,” he said.

‘A stain on the tax code’: Hedge fund legend Bill Ackman urges Biden to close the loophole that helped make him billions [Fortune via Yahoo!]
Private equity, hedge funds object to U.S. carried-interest tax hike proposal [Reuters]
U.S. Senate Democrats dive into details of surprise 725-page reconciliation bill [Wisconsin Examiner]

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