Tax hike to have negative impact on economy, says study

06 Sep '07

2 min read

The U.S. Chamber of Commerce released the first phase of a two-part study examining the main-street impact of proposed changes to carried interest.

The study, authored by noted economist Dr John Rutledge, documents the use of partnerships and carried interest across virtually every sector of the economy and examines the negative impact a tax increase would have on the economy, cost of capital, and tax revenues.

"Proposed changes to carried interest will impact 15.6 million individuals investing in 2.5 million partnerships across a broad and diverse range of America's economy," said David Hirschmann, Chamber senior vice president.

"Not enough of the discussion has focused on the breadth of the impact these changes will have on capital formation and investment on main street America. This is the first assault on a capital gains tax policy that has generated so much growth for the American economy."

This first phase of the study looks at the macro-economy and asserts that carried interest is a core element of partnership finance in every sector of the U.S. economy engaged in capital formation.

Increasing the tax rate on carried interest would lead to wholesale changes in the structure of partnership agreements, the costs of which would be borne by all members of the investment process.

The second phase of the study will provide greater detail on the economic impact to each specific sector of the economy which utilizes the partnership structure. It will be released in October.

The U.S. Chamber is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

U.S. Chamber of Commerce

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