October 16, 2007

October 16, 2007 | Commentary on Taxes

PRO-CON: Should Congress boost taxes on private equity firms?

Proposals now before Congress to "reform" the tax treatment of private equity partnerships would substantially increase taxes. Some estimates put the size of the increase at as much as $100 billion over 10 years for some versions of the legislation.

This tax hike would not only threaten the economy generally but would also jeopardize a particularly important and crucial part of the entrepreneurial economy: capital-intensive firms that take the risk of investing in and restructuring underperforming enterprises and putting them onto a sound footing.

But bills before Congress would change the tax treatment of these partnerships. One bill would subject publicly traded private equity partnerships to multiple taxation. These bills are bad tax policy as well as mere stalking horses for an attempt to raise taxes by undermining the proper, lower tax rate for capital gains.

Despite the talk of reform and loophole closing, the aim of these bills is clear: It is not to improve the tax code but to raise taxes even faster than under current law.

Stuart Butler is vice president for domestic affairs at The Heritage Foundation heritage.

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First appeared in the Kansas City Star