Bloomberg

With the presidential election coming up in November 2016, some candidates are campaigning with a familiar proposal: Get rid of the carried interest tax break.

Carried interest—the share of profits received by private equity managers—is taxed at the capital gains rate, which tops out at 20 percent, or 23.8 percent when the net investment income surtax is added. The top rate for ordinary income is 39.6 percent.

"Middle-market companies are crucial to achieving President Obama’s goals of economic growth, job creation and creating healthy communities. ACG stands ready to work with Congress and the administration to support and reward investment in the middle market," says ACG president Gary LaBranche. "As the “Voice of the middle market" ACG will continue to bring to Washington the message that a one-size-fits-all approach to legislation and regulation simply does not work for the middle market and private capital investors."

Among the proponents of doing away with the favorable tax treatment for carried interest: Republican candidates Donald Trump and Jeb Bush, and Democratic candidates Hillary Clinton and Bernie Sanders.

Despite the attention from the candidates, there is “no reasonable scenario” under which Congress will pass meaningful legislation in 2016 to change the tax treatment for carried interest, says Gary LaBranche, president of the Association for Corporate Growth (ACG). That’s because of the Republican opposition to the idea in both the House and Senate, and because the carried interest tax rate has widespread support, not just in private equity, but across the investing communities, including real estate.

That’s not to say that members of Congress won’t propose carried interest legislation in 2016 to try to boost their standing with voters, LaBranche says. “They’ll spend a lot of time lobbing in various proposals to position them for the future or to help themselves in their own Congressional elections.”

ACG will continue to battle against the portrayal of the carried interest tax rate as a loophole that benefits only the largest private equity managers, and show that the carried interest rate is actually designed to provide an incentive for investors to risk capital, and is a crucial tool in helping middle-market companies to grow, LaBranche says.

For more on ACG's lobbying efforts, see ACG to Open Office in Washington, D.C., in Public Policy Push.

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