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November 14, 2007
Chamber Study Shows Tax Increases on Partnerships Poses Great Risks to U.S. Economy
WASHINGTON, D.C.-The United States Chamber of Commerce today released a report showing that tax increases on business partnerships would hurt all parties involved, reaching beyond the general partners to hit limited partners, like investors and pension funds, as well as the companies that depend on equity investments. The study outlines additional damage to the U.S. economy, job creation, and retirees hurt by lower pension returns.
"This bill has been sold to the American people as a fixing a narrow tax loophole impacting a few private equity and hedge fund partnerships," said David Hirschmann, Chamber Senior Vice President. "This is a tax increase on partnerships and entrepreneurs, plain and simple."
The Chamber study was conducted by John Rutledge, Chairman of Rutledge Capital LLC, and showed that raising tax rates on carried interest would:
- Decrease the value of partnership assets by potentially $300 billion, directly impacting the 16 million people invested in 2.8 million partnerships as of 2005
- Result in very little additional tax revenues while increasing risk, wasting resources and decreasing efficiency
- Lower pension benefits and create more volatile investment portfolios (there are 10.5 million retirees in the 20 largest public pension funds invested in private equity and 3.8 million members in the 20 largest corporate pension funds invested in private equity)
- Especially damage real estate partnerships that account for 46% of all partnerships and bring $4.3 trillion of investment into the U.S. real estate sector
- Harm small businesses that do not have access to traditional financing, hurting the overall economy.
"Partnerships are a fundamental tool used to spur growth in America," said Hirschmann. "This tax increase would create a ripple effect from Main Street to Wall Street, choking a valuable tool for driving our economy and creating jobs."
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.
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