Senate Attacks Hedge Fund Tax Loopholes

This week, the US Senate considers a job and small business bill this week that may be funded by closing a tax loophole that allows hedge fund and private equity managers to pay capital gains rates on performance fees instead of ordinary income tax. By some estimats, closing this loophole could double the tax revenue generated by these hedge fund managers.

But of course, there are conflicting points of view. Len Burman, a professor at Syracuse University, describes the current taxation scheme as "a huge windfall to some of the best-off people in society." Meanwhile, those target by the bill claim they are being unfairly attacked. Because almsot a quarter of all investment partnerships involve real estate, these managerse could be hardest hit says, Jeffrey DeBoer of the Real Estate Roundtable. He adds, "What we're trying to do is make people understand this is very much a Main Street tax increase, not a Wall Street tax increase."

The bill, which likely has significant constituent support, will be voted on by the Senate this week.