Why Pension Funds Are Hooked on Private Equity
When President Obama unveiled his budget last Wednesday, it rekindled a debate over taxation of the private equity industry. Many executives in the private equity business (as well as the venture capital and hedge fund businesses) pay the capital gains rate on their earnings rather than the higher rate paid on ordinary income. Even though these industries make most of their money from the appreciation of assets — the definition of “capital gains” — the President, and many others, believe it is unfair that employees of these funds are able to pay the capital gains rate. After all, these execs are getting paid to manage these funds, not for risking their own capital. Of course, the private equity industry isn’t going to take such a tax hike lying down. According to Politico, the Private Equity Growth Capital Council recently sent a white paper to the House Ways and Means Committeer extolling the benefits of private equity for America’s pension funds. According to the paper: “Since ...
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