This probably should be no surprise, but readers of peHUB expect the tax-advantaged status of carried interest to remain untouched after the election of 2012.
A solid majority, at 53%, felt comfortable predicting in our Question of the Week that carry would continue to be taxed at low low capital gains rates. Interestingly, the minority split almost down the middle whether carry would come to be seen as regular income or at some compromise rate in between.
One thing, however, is certain: After Mitt Romney finally released his tax returns today, people are going to become much more thoroughly educated on the issue. The expression “carried interest” did not appear in a list of talking points released by the White House in advance of his State of the Union address tonight, but the memo does offer a vision of an America where ” everyone does their fair share, and everyone plays by the same rules.” Clearly, the tax question will be a central issue in the election campaign ahead.
Even if the rules are changed for carry, smart deal makers will simply adopt financial structures that will continue to protect their incomes. As John Carney put it at CNBC.com, “Any attempt to tax it as ordinary income will just result in fund managers converting to a structure that makes the capital gain nature of the gain even more obvious.”
That analysis assumes that it would be only carry, and not capital gains in general, that would lose its favorable tax treatment.
Steve Bills is a senior editor at Buyouts Magazine. Any opinions expressed here are entirely his own. Follow him on Twitter @Steve_Bills. Follow Buyouts tweets @Buyouts. For information on how to subscribe, contact Greg Winterton at email@example.com.