Republican Representative Darrell Issa called the tax treatment of carried interest a “classic loophole” while participating in a panel discussion at the Republican National Convention in Tampa Tuesday night.
Issa, who chairs the House of Representatives’ Oversight and Government Reform Committee, went on to defend Republican nominee Mitt Romney’s use of the ‘loophole’, adding: “Corporate America will always find the lowest possible taxes based on government … But, you know, this is not unexpected,” according to Politico, which also hosted the panel.
Issa voted against legislation in 2009 that would have increased taxes on carried interest.
Republicans, including Romney and Republican Vice Presidential nominee Paul Ryan, have long cited the closing of tax “loopholes” as an essential part of any plan to lower the budget deficit. Issa’s specific designation of carry as a loophole may put Romney’s campaign in an uncomfortable position on the issue, on which it has yet to make a clear statement.
A spokesperson for Issa did not respond to a request for comment. The Romney campaign has not responded to repeated requests for comment.
In the US, carried interest is taxed at a capital gains rate of 15 percent. President Barack Obama and other Democrats have repeatedly proposed treating carry as ordinary income, which would subject it to a rate as high as 35 percent, in an effort to increase revenue. So far, those efforts have been rebuffed by Republican-led opposition.
The carried interest tax issue has been thrown into the spotlight recently by the candidacy of Bain Capital founder Mitt Romney, who indicated that his effective tax rate has been no less than 13 percent over the last decade. Romney has generated much of his substantial wealth as a GP in Bain’s investment vehicles – earnings that are taxed at the lower capital gains rate.
Issa has been politically backed by a number of individuals with experience in the private equity industry for years, according to Federal Elections Commission documents. Raymond Debbane, chief executive of private equity firm Invus Investments, gave Issa’s political action committee $5,000 in 2009. Debbane was unavailable for comment.
Other contributors to the PAC list firms such as Fortress Investment Group, GMT Ventures, Western States Investment Corporation and Wafra Investment Advisory as employer/occupation on FEC documents.
One donor with ties to the alternative investment community told Private Equity International that they would “really have to look more closely at what he was saying” before changing their view of Issa.