Obama eyes carried interest to help pay for jobs bill

US President Barack Obama is targeting private equity managers to help pay for a $447 billion jobs plan.

Obama announced today that he wants to raise $18 billion by taxing the carried interest of private equity managers, real estate investors and venture capitalists as ordinary income, instead of capital gains. The president has long favoured executives of private equity firms to pay ordinary income tax rates as high as 35 percent (39.6 percent after 2012) on the profits they receive as compensation.

“We’ve got to decide what our priorities are,” Obama said during a press conference. “Should we keep tax breaks for millionaires and billionaires — or should we invest in education and technology and infrastructure, all the things that are going to help us out-innovate and out-educate and out-build other countries in the future?”

The largest US-based private equity trade association, the Private Equity Growth Capital Council (PEGCC), swiftly condemned the proposed tax hike. “Proposals to raise taxes on carried interest consistently have been rejected for more than four years because raising taxes on investments would only sideline employers and investors and create further uncertainty in an already struggling economy,” Steve Judge, interim president and chief executive officer of the PEGCC, said in a statement.

Obama’s plan also targets oil companies, which would face roughly $40 billion in new taxes over the next 10 years. The lion’s share of the proposal would be paid for by capping itemized deductions and exemptions for people making more than $200,000 per year. This would raise about $400 billion.