Good News on Taxes

There’s no doubt that President Bush will veto any capital gains tax hikes that congressional Democrats are proposing for buyout funds, hedge funds, and other private partnerships.

Through White House spokesman Tony Snow, the president said he’s prepared to veto any measures to increase taxes.

Treasury chief Henry Paulson said, “I don’t believe it makes sense to single out one industry….We need to be careful dealing with something like this piecemeal.”

SEC Chairman Chris Cox testifying before Congress said, “The funds that Blackstone manages are indeed investment companies but the fund manager is not, under the law.” Cox stressed that Blackstone management is a partnership that’s entitled to the 15 percent capital gains tax, not an investment company liable for paying higher income taxes.

This is good news.

Democrats are assaulting the capital gains tax itself, as well as the differential between the 15 percent capital gains rate and the 35 percent tax rate on individual and corporate income.

With countries around the globe racing to reduce their tax rates, it is foolhardy for the United States to be raising them. We should be encouraging and rewarding investment risk and all forms of entrepreneurship.