Randy Kuhl voted against the
Temporary Tax Relief Act of 2008, in a
party-line vote this afternoon. Like all tax legislation, this bill is complex. The Democratic line on the bill is that it rolls back the Alternative Minimum Tax for a year, and finances it by increasing taxes on private equity fund managers and other rich folks. Representative Kuhl's
view is that it is "an egregious tax hike on entrepreneurs and risk-takers who invest and create family-wage jobs."
The independent site Washington Watch, which is run by a member of the Cato Institute, a conservative/libertarian think tank,
calculates that the bill will save the average US family $91.50 from their tax bill. The Congressional Budget Office (CBO)
analysis [pdf] says that:
[...]the bill would treat certain income of partners from performing investment management services (called “carried interest”) as ordinary income for tax purposes, rather than as capital gains, which JCT estimates would increase revenues by $25.6 billion over the 2008-2017 period.
Translation: private equity fund management fees that are being taxed at 15% will soon be taxed at 38%.
The question is whether private equity funds are "entrepreneurs and risk-takers." The point of capital gains taxation is to reward those who risk their money in a longer-term investment. Private equity managers have
structured their compensation so that it looks like a capital gain in order to get a lower tax rate. I don't think that's the kind of entrepreneurial cleverness the tax code is meant to promote.