The Sept. 25 letter by state Rep. Nathan Wadsworth is highly deceptive. He claims that bills in Congress (HR 1068/S.1598) would “tax the very investments that many small businesses rely on … .” This is untrue.

Those bills would change the tax status of “carried interest,” which is now taxed as long-term capital gains. They call for taxing carried interest as normal income, likely raising the tax rate for some who receive it.

So, what’s specifically untrue? Wadsworth says that “in practice, (the bills) will raise taxes on investments in small business.” Implying, one supposes, that small businesses in Maine will see less investment or have to pay taxes on money they invest. They won’t. No investments would be subject to this tax.

Then, who would pay this increase? Again, the burden would absolutely not fall on small businesses or, somehow, on the retirement plans of public servants, as Wadsworth suggests. Who is affected would be managers of hedge funds and other high-end investors who are paid, or who pay themselves, this carried interest. Think Mitt Romney or Warren Buffett.

Carried interest – called that because it originated in 16th-century shipping – is now a performance bonus for successful fund managers. It’s in no way a capital gain, so it shouldn’t be taxed as a capital gain. These bills would recognize carried interest as the normal income that it is, and tax it appropriately.

In his next letter, perhaps Rep. Wadsworth could explain why he’s not telling the truth.

Joe O’Donnell

Related Headlines

Comments are no longer available on this story

filed under: