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President Obama Hedge Funds

President Obama Hedge Funds

Obama Looks to End Tax Breaks for Hedge Fund Managers

President Obama has again called for Congress to close the tax loophole that allows carried interest to be taxed at a lower rate than ordinary income. This is a sensitive issue for hedge funds and private equity managers who are compensated largely by carried interest and have benefited from the preferential tax treatment.

In yesterday's press conference, the President referred specifically ending tax breaks for hedge fund managers as one of the ways to raise revenue as part of the government's efforts to reduce the federal deficit and avoid a government shutdown by August 2, the date that Treasury Secretary Timothy Geithner has said that the government will default on its debt.  Hedge fund managers were not the only targets of the President's speech, he also spoke of corporate jet owners (which, admittedly, could be hedge fund managers) and CEOs. 

During a press conference lasting more than an hour, the president blasted congressional Republicans for refusing to compromise on revenue-generating measures to offset deep spending cuts. "Everybody else has been willing to move off their maximalist position," the president said. "They need to do the same."

Democrats, who agreed to as much as $2 trillion in spending cuts during negotiations that were broken off last week by Republicans, are calling for an end to several tax breaks and loopholes. One, the so-called carried-interest loophole, allows hedge and private equity fund managers to pay the much lower capital gains rate on the performance fees they earn.

Obama and congressional Democrats have tabled an end to that loophole, which could more than double the amount of taxes hedge fund managers pay, as well as an end to or reduction in tax breaks on oil and gas companies and corporate jets.

"You'll still be able to ride on your corporate jet," Obama said in one of six mentions of the issue. "You'll just have to pay a little more."

The president added that CEOs and hedge fund managers are paying the lowest tax rates in almost 60 years.  Source

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