TASK FORCE OPPOSES PASSAGE OF ANTI-COMPETITIVE TAX POLICY
Sends letter reporting findings on carried interest and publicly traded partnerships
Washington, DC - The Senate Republican Capital Markets Task Force, led by Idaho Senator Mike Crapo, sent a letter today to Senate Republican Leader Mitch McConnell reporting to him the Senate should not increase tax rates on carried interest and publicly traded partnerships in order to offset tax legislation that may come before the Senate in the remaining weeks of this year's session. The letter included the signatures of 20 members of the Task Force and was sent in response to the passage of H.R. 3996, the Temporary Tax Relief Act of 2007, by the House on November 9. Late Thursday, Senate Majority Leader Harry Reid attempted to bring the bill to the floor for consideration but Senator McConnell objected to Reid's request, which would not have given Senators the opportunity to strike these proposed tax increases.
"Republican economic policies such as cutting marginal tax rates and reducing taxes on capital gains and dividends have produced tremendous growth in our economy," members of the Task Force said in the letter. "Rather than building on the proven success of these tax policies, H.R. 3996 goes in the opposite direction by increasing taxes on capital formation."
The creation of the Senate Republican Capital Markets Task Force was suggested by Crapo in order to advise the Republican Caucus on U.S. business competitiveness issues with a specific focus on capital markets. McConnell constructed the Task Force earlier this year and called on Crapo to serve as Chairman. It has held a series of roundtable meetings with key stakeholders in the sector of carried interest and publicly traded partnerships over the past several months.
Coming out of these meetings, Crapo reports that making fundamental changes to laws affecting the taxation of partnerships would curtail the pooling of capital, ideas and skills causing a reduction in entrepreneurship and risk taking. He also reports that significantly raising taxes on capital formation in the United States will increase the cost and decrease the availability of capital to businesses throughout the country. This could severely handicap a vibrant and growing part of the U.S. economy. Finally, Crapo reports that virtually every Western European nation taxes carried interest as a capital gain and there is a risk of a loss of U.S. intellectual capital to London or other jurisdictions.
"International competition for capital is a driving factor for business," the letter continues. "The last thing we should do is put American businesses at a disadvantage by increasing taxes on capital formation driving investment dollars away to other markets."