Talking Carry with Congressman Reynolds

Yesterday, I wrote that Obama’s victory signaled the coming end of carried interest being treated as capital gains. It’s a change that I have publicly supported for more than a year, but I still wanted to check in with its most vocal opponent, Congressman Tom Reynolds (R-NY).


Reynolds did not stand for reelection this time around, and will be one of several GOP departures from the House Ways & Means Committee (Phil English, Jerry Weller, Jon Porter, Ron Lewis). He said that the shakeup will make it more difficult for Republicans to effectively fight Democratic efforts to change tax policy, but that the Committee still has “fine leaders” like Eric Cantor and Paul Ryan.

“I think everything is now on the table,” Reynolds says. “The private equity carried interest issue was out front, and any time you have exposure to potential revenues, it never goes away.”

Reynolds declined to outright predict that carried interest treatment would be changed, instead couching it as part of a larger situation: “I firmly believe from everything I’ve seen and heard that this new Congress and new President are set to watch the Bush tax cuts expire, which included the lowering of capital gains rates from 20% to 15 percent… They have an agenda that is going to be expensive, and there doesn’t seem to be much mindset for spending cuts, so revenues need to be found somewhere… I think Charlie Rangel and his Democratic colleagues – and maybe even a Republican rep or two – will probably revisit carried interest as a revenue source.”

Reynolds added that there may be a far broader movement to eliminate favorable tax treatment for capital gains altogether, which could make the carried interest issue moot. In the meantime, however, he said it would be incumbant on industry participants and trade organizations to “outline for Congress and the White House that changing carried interest would have a serious negative impact not so much on the industry itself, but on areas like New York, San Francisco and Chicago.”