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Montana Tax: Senator Softens Increase in Carried Interest Tax

Senator Max Baucus, Democrat of Montana and chairman of the Finance Committee, proposed Tuesday a somewhat less drastic increase in taxes on private equity managers and venture capitalists than the one passed by the House.

As part of a spending bill to restore unemployment benefits and provide states with $24 billion for health care costs, the measure would tax as regular income 65 percent of so-called carried interest paid as compensation to those in private equity investments after 2012. The House version would tax 75 percent as regular income, with a tax rate that could go as high as 39.6 percent.

Currently, all carried interest is taxed at the capital gains rate of 15 percent, although that rate is going up to 20 percent when the Bush tax cuts expire next year.

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