Bogle Says Tax Break for Private Equity Firms ‘Ridiculous’
February 23, 2012, 10:13 AM ESTBy Sree Vidya Bhaktavatsalam
(Updates with details of carried interest in third paragraph.)
Feb. 16 (Bloomberg) -- John Bogle, the Vanguard Group Inc. founder who popularized index investing, said lower tax rates for certain types of gains earned by private equity firms are “ridiculous.”
“I’m arguing for the capital gains rate taxable as ordinary income,” Bogle said today during a portfolio managers conference in New York organized by Bloomberg Link.
Private equity managers typically earn a percentage of their profits from investments as compensation, which is known as carried interest. So-called carried interest is taxed at the 15 percent rate for capital gains, rather than the 35 percent top rate that applies to regular income.
“Carried interest is a bit of a technical fraud,” said Bogle, 82, who described himself as a lifelong Republican. “I do feel these things strongly.”
Mitt Romney’s campaign for the Republican presidential nomination has drawn increased scrutiny to the private equity industry, including his former firm, Boston-based Bain Capital LLC. President Barack Obama’s fiscal 2013 budget proposal, released earlier this week, reiterated his plan to tax carried interest earned by hedge fund managers and private equity partners at ordinary income rates, raising $13.5 billion over a decade.
--Editors: Josh Friedman, Larry Edelman
-0- Feb/16/2012 17:43 GMT
To contact the reporter on this story: Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net -0- Feb/16/2012 17:39 GMT
