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Wall Street Roundup

Democrats raise tax hike concerns

August 01, 2007|From Times Wire Services

Four top U.S. Senate Democrats raised questions Tuesday about hiking taxes on private equity firms and hedge funds.

Senate Banking Committee Chairman Christopher J. Dodd, a Democratic presidential candidate who represents Connecticut, where many hedge funds are based, said in a statement he was "concerned about the potential adverse effects that these proposals would have on capital formation, on job creation, and on institutional investors."

A bill introduced in June by Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and the committee's senior Republican, Sen. Charles E. Grassley of Iowa, would more than double taxes on private equity firms and hedge funds that are publicly traded partnerships.

At a Finance Committee hearing, three other top Democrats -- John F. Kerry of Massachusetts, Charles E. Schumer of New York and Ron Wyden of Oregon -- also expressed concerns about such a proposal.

Schumer said it would be unfair to target investment firms for a tax increase when other sectors, such real estate and oil and gas ventures, used similar tax structures.

Wyden said Congress' time would be better spent on comprehensive tax reform rather than piecemeal approaches.

The wary comments came after weeks of heavy lobbying by the private equity and hedge fund industries.

A related bill has been introduced in the House that would more than double taxes on "carried interest," the share of investment profits that senior managers of private equity firms and hedge funds receive.

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