A big tax break that benefits U.S. private equity and venture capital executives is under threat again, and this time the chances of preserving it may have dimmed, according to a Reuters analysis yesterday. President Barack Obama said at a news conference yesterday that he will pursue a short list of tax loophole closures to try and avert looming budget cuts. Obama on Sunday had mentioned carried interest in a CBS television interview in which he called for reducing the budget deficit by closing tax breaks to raise more tax revenue. Past attempts by some senior Democrats to roll back the provision have failed amid heavy lobbying by the private equity industry and other investment managers. The tax break has been defended by lawmakers from both parties, but this time advocates of repeal say they may have the upper hand. Carried interest is an industry term that describes a large portion of the investment gains realized by private equity managers, as well as executives at some venture capital, real estate and hedge funds. The tax break allows these financiers—many of whom are among the wealthiest people in the country—to treat such income as capital gains, making it subject to a tax rate of only 20 percent, instead of the nearly 40 percent top rate on ordinary income paid by the highest earners.
