I understand the appeal of the law -- get those hedge funds! But it also goes after real estate with a vengeance. Take your small to mid sized real estate developer who takes a risk by working on a brownfield or on a project in a marginal area or with IRRs that only work because of the nature of the investment. So, those borderline deals go away, as to the leases, the sale, the construction jobs, the employment that comes with the finished real estate. You get the picture. What seems reasonable on the surface is a devil in the details.
Or, as Robert Green puts it (with a hat tip to David Bodamer)
Put another way, we are not by any means out of the woods yet, gang, at least not in my humble opinion. Let's not do anything rash that could cause a double-dip in the market. As it is the industry is not exactly, shall we say, robust.Repealing carried interest is losing appeal as more and more leaders oppose its consequences, unintended or otherwise. It’s a growth killer in this weak economy and it’s un-American to tax small businesses with ordinary income after their lifetime of hard work to build up their business with risk capital. These entrepreneurs, including investment managers, deserve capital gains when appropriate. And remember, often times carried interest is ordinary income too.
Have a great weekend!