Updated with correction
Legislation to end the carried interest deduction for private equity general partners, requiring them to pay ordinary income tax rates up to 35%, was introduced in the House Tuesday.
Rep. Sander Levin, D-Mich., ranking member of the House Ways and Means Committee, introduced the bill. President Barack Obama's fiscal 2013 federal budget contains a similar proposal.
“There is absolutely no reason why income earned for managing other people's money shouldn't be taxed in the same way as income earned teaching or working in a factory,” Mr. Levin said in a statement. “This loophole for years has unfairly enabled some of the highest-paid individuals in the country to sharply reduce their tax bills, and it is time to close it once and for all.”
Steve Judge, president and CEO of the Private Equity Growth Capital Council, argued that raising taxes on private equity investments “would discourage the risk-taking required to start, save and grow companies.” He noted in a statement that various proposals to eliminate the carried interest rate have been defeated numerous times in recent years.
The bill has not yet been scheduled for consideration by the House Ways and Means Committee.