Update: taxing carried interest

December 10, 2009

As we have written elsewhere, the proposed carried interest tax increase is a drag on investment and job growth during a recession and attacks an industry that (a) doesn’t ask for bailouts and (b) is critical to the nation’s economic performance.

Today’s WSJ covers the most recent development: Zero to 35 in 24 hours

House Democrats keep stepping on President Obama’s applause lines about innovation and job creation. On Tuesday, Mr. Obama announced that “we’re proposing a complete elimination of capital gains taxes on small business investment” for one year.

Responding with rare dispatch, the House voted yesterday to change the capital gains rate for venture capitalists who invest in technology start-ups. But rather than eliminating the tax, the House more than doubled it, moving the tax rate to 35% from 15% by reclassifying such gains as ordinary income.

Knowing how popular tax increases are with unemployment at 10%, the House majority rushed the bill to the floor without a hearing or even a committee vote. Then they buried it in a package advertised as an extension of tax cuts for research and development.

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