The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness released a report this week that examines the impact of a proposed 98 percent tax increase on carried interest capital gains that will be among the major tax hikes on businesses that will be considered as part of the $3.5 trillion budget reconciliation bill in Congress.
The report, entitled Impact on Jobs, Tax Revenue, and Economic Growth of Proposed Tax Increase on Carried Interest, said the tax increase would reduce investment, lead to job losses, and decrease tax revenues at the local, state, and federal levels.
“New carried interest taxes would harm the innovators who are leading America out of the pandemic and the main street businesses that are fueling the economic recovery,” Tom Quaadman, executive vice president of the U.S. Chamber Center for Capital Markets Competitiveness, said.
“Moderna, for example, was able to tap private equity and venture-capital funding to conduct the research that led to the Covid-19 vaccine. Similarly, private equity funding provided a lifeline to thousands of American businesses and real estate partnerships that are crucial for new home construction and affordable housing. Almost doubling certain taxes on private equity and venture capital investments will restrict access to capital, harming job creation and innovation,” Quaadman added.
The report estimates that it could result in 4.9 million job losses within five years and annual net revenue tax losses of $96 billion over that time. Also, it estimates that pension funds would lose up to $3 billion annually while private equity, venture capital, real estate partnerships, and their portfolio companies would be directly hit by the tax increase.