2016 Presidential Race Picking Up

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With the 2016 presidential race picking up, one of the main issues that are being deliberated among candidates and politicians is the private equity industry and it’s and widespread abuse of a tax loopholes. During the Obama administration, there had already been talks regarding the taxing of “carried interest”, the 20% incentive fee charged by private equity firms, as regular income rather than capital gains. In spite of the failed effort, politicians from both parties are now aggressively pushing to close the prominent loopholes enjoyed by fund managers widely. Additionally, private equity firms are being scrutinized for taking investors’ money regardless of whether or not they allocate the capital into deals. These two major issues from…show more content…
Under current legislation, managers can avoid paying steep income taxes on the 20% incentive fee in favor of the significantly lower capital gains taxes, thereby saving hundreds of millions of dollars annually at the expense of the middle-class taxpayer. This is accomplished through for the use of “management fee waivers” and “carried-interest” tax loopholes that recognizes the 20% incentive fee portion as capital gains. *Note, that ordinary income tax rate maxes out at 39.6% while the capital gain tax rate is only 23.8%. Bipartisan push for Private Equity Tax Reform Class-warfare is a term that is often thrown around by Republicans to describe any attempt to tax the upper-class, and yet Republicans and Democrats alike have found common ground when it comes to eliminating the carried-interest tax break. Recently, President Barack Obama met with Business Roundtable, an association comprising of the nation’s top CEOs, to argue his case for eliminating the prominent tax loophole. He states that the tax loophole provides no recognizable economic benefit, but instead is causing the middle-class to suffer financially as a consequence. With the current income disparity levels at record highs, the financial industry has also become the new target for many 2016 presidential nominees such as Sanders, Clinton, Bush, and Trump to name a few. So the question that begs to be answered is “will
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