Back To Tax Reform: The Carried Interest Rate Should Be Kept (Or Cut)

by Seton Motley, Contributing Author: About to end is the August recess Congress so richly earned with their great first-half-of-the-year work repealing Obamacare and other long-promised, Republican-control-of-Washington-contingent agenda items.

I kid. I kid because I love…less government governmental action.

Like tax cuts and tax reform. Which we are told is Item #1a on Congress’ return-to-DC to-do-list. We have needed tax cuts for (at least) years – and reform for decades.

The tax code is a ridiculous thicket of anti-productivity nonsense. Which binds us up in a compliance nightmare mess – when our time could be much better spent creating more wealth for everyone. Blood-sucking government included.

One of the clarion calls of the anti-progress progressives is, of course “Tax the rich!” And today’s Left want “tax reform” – to include more pummeling of those who earn coin.

But the tax code is already ridiculously progressive. Which means if you make more coin – you are forced to pay MUCH more in taxes. 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.

(Which is a violation of the Constitution’s Fourteenth Amendment – specifically its Equal Protection clause. You can’t pass a law that treats different people differently. But that’s a discussion for another time.)

One of the Left’s tax code bete noires – is what is called “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 all that? “Carried interest” – is a tax on long-term investment income. Which is…a capital gain – NOT income in the traditional, let’s-tax-it-at-the-higher-rate sense.

“Carried interest”…is individuals investing in the marketplace – for future use when they cash out.

Like say…we 99%-ers saving for our retirement. Saving money, by the way, on which we’ve already paid income and other taxes. So taxing it AGAIN at the ridiculous, higher income tax rate – would be…ridiculous.

Oh – and saving is one of those things the pro-government types SAY they want us to do. But then they champion laws and prospective laws that clearly demonstrate that they do not want us getting anywhere near saving anything.

Calls for raising the rate on carried interest – is just such an anti-savings prospective policy.

Let’s not, shall we?

Oh – and if we’re going to move the “carried interest” rate, let’s move it down.

You pro-government types all say you want us to save – right?

You raise cigarette and soda taxes – to get us to do less of those things.

How about cutting the carried interest rate – to get us to save more?

Because you pro-government types all say you want us to save – right?
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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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