President Joe Biden has suggested eliminating the carried interest tax break that has benefited private equity and venture capital businesses.
Biden proposed nearly doubling the capital-gains tax for individuals
earning $1M and more to 39.6%. With the additional Medicare surcharge,
Bloomberg estimates that investors may end up paying nearly 44.6% in
taxes on investments.
- Due to the capital gains clause, PE and VC fund managers are able to pay 20% tax on carried interest instead of the 37% they would have had to if it were subject to individual income tax.
- Additional
changes proposed include raising the personal tax rate from 37% to
39.6%, raising the corporate tax rate from 21% to 28%, and imposing a
minimum tax rate of 25% on households with incomes exceeding $100M.
- This isn't the first time that Biden has proposed the tax-break reductions. Biden had to drop the provision from the Inflation Reduction Act, which passed last year, after it was opposed by Arizona Sen. Krysten Sinema.
