A Quick Thought on Carried Interest
June 4, 2010
John Reeder over at MarketWi.Se has a post up with some of his views on the carried interest tax as well as those of Fred Wilson, a prominent venture capitalist. There has been a lot of debate about this tax, and I’ve even posted a couple times here and there on the issue.
Much of the debate has been centered on figuring out how the carried interest tax is going to change the investing world and climate. It seems though that much of the debate lacks the context of numbers and that many are ignoring the issue that will change their world more than any carried interest tax ever will.
The national debt of the United States is growing by $5B every day. The carried interest tax, according to the CBO, is estimated to bring in an additional $19B over the next 10 years. See the problem?
I concede that the carried interest tax is a small part of an overall solution, but frankly at this point we’re beyond the issue of a carried interest tax. What real estate investors and managers - and other investors alike – should really be concerned about is the debt we’ve amassed and continue to amass, and the further exacerbation of said debt once the effects of the healthcare bill kick in.
Aside from the Armageddon option, there’s only two ways out of debt: growth or taxes. If we don’t get growth, we’re going to get taxes; in which event investors and fund managers should be less concerned about the effects of any carried interest tax and instead focused on trying to understand the effect taxes will have on consumers and businesses, and how that will affect demand and ultimately asset values.
Similar Posts:
- Obama Proposes Taxing Carried Interests (Promotes) as Ordinary Income
- Legislative Update: Congress Looking To Raise Carried Interest Tax
- Prudential’s Case for CRE
- Tax Implications of Loan Forgiveness
- Bill Gross Says U.S. Understates Inflation
Tags: Carried Interest, Commercial Real Estate, Debt, tax, Taxes
The $19 billion in carried interest revenue is just going to crater investment in a lot of areas, and the effect of the lower levels of investment are going to be are far greater than the additional revenue they generate by the change. Politicians don’t seem to have a clue about how revenue works…
That’s exactly right. They are reducing the incentive for groups to raise capital and deploy it into the economy. We have a bunch of sailors drunk on debt trying to navigate us through the perfect storm.
That’s exactly right. They are reducing the incentive for groups to raise capital and deploy it into the economy. We have a bunch of sailors drunk on debt trying to navigate us through the perfect storm.