Obama Proposes Removing Capital Gains Tax Benefits

First of all, in the near-term, not many of these funds are generating enough returns to make this matter? How many hedge funds turned a profit last year? How many this year. It might mattter in 5 years when funds that bought assets at low prices turn a profit, but not now. This is a long-term issue, but not a short-term issue. There are much more pressing-short term issues in Manhattan real estate: namely, that many private equity/hedge fund business models are simply not sustainable. Tax rates don't matter when profits are negative.

Second, this WILL go through. We have a democratic congress, and there is NO justifiable reason that "carry" should be taxed as a capital gain. Employee stock options are taxed as ordinary income, and carry is the same concept. Partners who recieve "carry" aren't putting their own capital at risk - unless they co-invest - so they have all of the upside but no downside. For the entrepreneur who puts their own capital at risk, I am all for having low or no capital gains tax ... but private equity/hedge fund carry is not the same thing. And I say this as one whose own wallet will be negatively affected by this. It's only a matter of time, and it is the right thing to do.

Nobody has to worry about this tax because nobody has capital gains right now. So go home pople. Nothing to see here.

It does show that the Obamanauts are socialist, soak-the-rich liberals. I expect a pretty significant backlash in 2010 or 2012.

It does show that Obama his team are pragmatic, sound-reasoning Americans who value work and its reward, rather than easy money. More landslide victories, more long coat-tails.

It may not matter in 2009 or 2010 but this will have a huge impact on NYC real estate. Spending on big ticket items is all about your view of career earnings. Doubling the tax rate on carried interest halves that view. You could not write a worse script for NYC real estate than the one unfolding before our eyes.

So NYC real estate becomes less expensive, as does land and development costs. Plenty of wealthy people lived here in the past, when prices were much lower, as well as salaries, and capital gains tax rates were higher. Prices were artificially inflated. Nothing wrong with them reverting (unless you bought in the last few years, of course).

"Nobody has to worry about this tax because nobody has capital gains right now. So go home pople. Nothing to see here."

I thought there were funds making money, just in the minority. My point was that this lowers the spending power even for those who are managing to play this market right.

"Second, this WILL go through. We have a democratic congress, and there is NO justifiable reason that "carry" should be taxed as a capital gain. "

I think you're wrong. I think the Republicans, who can stop something dead in the Senate unless there are defections, will put up a goal-line stand on this one. The Dems in 2007 were against raising the capital gains tax, for crying out loud. It will take political genius to get this through. IMO.

"It does show that the Obamanauts are socialist, soak-the-rich liberals."

Well, since the current level of tax on these profits is BELOW the general income tax level, I can't see how this is socialist. I think one could argue that the current levels are subsidizing certain groups of people, actually.

Overall, I'm not actually taking sides on this one. However, I don't think it's necessarily insignificant to RE concerns. But I agree there are currently bigger issues, "first-order" terms in the equation that are dominating.

alanhart you're kidding right? - Obama is worse than Bush when it comes to taking one man's money and giving it to another. Please bring back Bill Clinton who actually reduced our welfare state.
I hope the law passes - there is no reason (other than cronyism) that carry is not taxed as ordinary income - none.