‘Carried Interest’: Let’s Not Increase Taxes On Our Economy’s Engine

by Seton Motley, Contributing Author: Leftism is such an easy soundbite sell. It’s a gaggle of five-second one-liners that seem to make perfect sense – right up until someone applies actual thought to any of them.

One of the all-time favorites is – “Tax the rich!” (I’m fairly sure the exclamation point is always mandatory.) They’re rich, they’re evil – they should pay MORE!

But let’s now apply some actual thought to their fortune cookie wisdom.

The dreaded One Percent – pay nearly half of all federal income taxes. So they are paying “their fair share” – and the fair shares of roughly 150 million other Americans.

Then there’s all sorts of additional taxes wealthy people pay (that most of the 99% do not). Most of these taxes tax money – that has already been taxed as income (which I find to be particularly, additionally obnoxious).

Most of these taxes – attack the money that makes our free market system possible. Income taxes are awful and pernicious – but it is the taxes on big coin pools that are really an assault on our system.

You can’t have capitalism – without capital. Big capital. Huge, heaping piles if it. 1%-er money. The kind of capital – that gets invested.

Without those piles of cash – banks and other investors have nothing to loan. To businesses that want to get started – and expand. No businesses – no businesses hiring the 99%.

When Barack Obama said “At a certain point, you’ve made enough money” – he betrayed a profound contempt for and/or ignorance of how any of this works.

We want these 1%-ers – wanting to make as much coin as possible. Because we NEED these guys making as much coin as possible. Because they make more coin – by making it possible for the rest of us to make any coin at all.

One such anti-capitalism tax under possible consideration for hiking – is on “carried interest”:

“What is ‘carried interest?’ It’s not a deduction, it’s not a loophole, and it’s not a provision. Rather, it’s a type of capital gain.

“Specifically, it’s a capital gain earned by an investment partnership. Even more specifically, it’s a capital gain earned by an investment partnership as allocated to the managing partner (as opposed to the limited partners).

“That’s it. It’s so simple, even political reporters from the New York Times could understand it.

“It’s not compensation. It’s not a write-off. It’s not anything other than simply and obviously what it is–a long-term capital gain, earned by an investment partnership, derived from the sale of an asset the partnership built and managed and grew.

“That’s all. No one who knows the first thing about taxes disputes that it’s the capital gain from the sale of an asset.”

Get that? “Carried interest” is a tax (well, yet another tax) – on the investment money we desperately need. The lifeblood of any hope the rest of us have of making a living.

Thankfully, the tax reform package Congress is currently considering – leaves this tax and its rate right where they are. Treating the earned coin as a capital gain – which it is – and taxing it at the capital gain rate.

But the anti-capitalism actors are everywhere. They want to tax this money – on which these people have already paid the much higher income tax rate – again at the much higher income tax rate. Is this a good idea?

Taxing Carried Interest Capital Gains As Ordinary Income Is A Very Bad Idea

No it is not.

To be absolutely sure – lots of the tax code needs LOTS of reform.

How we tax carried interest – does not.

Well, LOWERING the rate thereon wouldn’t be a bad idea. But maintaining the status quo – is a win.

For everyone. Most especially us 99%-ers – who need that coin active and in play for our gainful employment.
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Seton Motley is the President of Less Government and he contributes to ARRA News Service. Please feel free to follow him him on Twitter   /   Facebook.

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