Wednesday, September 05, 2007

Earvin Takes Magic to Washington

From today’s WSJ:

WASHINGTON -- The private-equity industry is taking a new tack in its fight against a bid to raise taxes on fund managers, arguing the effort would harm investment firms owned by women and minorities, and discourage economic activity in neglected areas.

Minority and women business leaders today plan to announce a new group, the Access to Capital Coalition, to oppose a move in Congress to raise taxes on carried interest, a cut of profits that hedge-fund and private-equity managers receive. Among the high-profile business people enlisted in the fight: Former basketball star Earvin "Magic" Johnson, who now is chairman and chief executive of Johnson Development Corp., which invests in bringing businesses into urban areas....

Good for Magic. The most valuable thing for these minority businesses and entrepreneurs is capital. It is the seed corn of future economic growth.

The last thing Congress should be doing is threatening to raise the cost of capital for minority firms investing in low-income areas. Reducing their investment returns is a surefire way of stunting growth in areas thirsting for capital.