This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Budget Deal: Yes to Carried Interest, No to Unemployment Insurance

NEW YORK (TheStreet) -- A bipartisan budget agreement brokered by Rep. Paul Ryan (R., Wis.) and Sen. Patty Murray (D., Wash.) late Tuesday underscores that it has never been a better time to be a private-equity manager and a worse time to be among the nation's unemployed.

Tuesday's budget deal appears to allow the government to finance itself through September 2015, while targeting $23 billion in deficit reduction and eliminating about $63 billion in across-the-board domestic and military spending cuts.

This, folks, is the deal we have been waiting for for more than two years, and apparently was the political lightning rod that led to a downgrade of the country's credit rating and a near default. Apparently, lawmakers in Washington are now patting themselves on the back for the bipartisan deal.

If the Ryan and Murray budget deal indicates that the gears of government may soon begin to turn again, amid much needed legislation on immigration reform, taxation and education, then the compromise could represent positive momentum in Washington after a long freeze.

Unfortunately, the deal's lack of ambition, or even relevance in today's economic environment, indicates that Washington will continue to operate with only the most short-term vision. That perpetuates a political climate that benefits the ultra-wealthy, while casting further uncertainty on the working class and the poor.

Per Tuesday's deal, there will only be a few weeks for lawmakers to extend unemployment insurance to the long-term unemployed. Furthermore, first steps in negotiating a chasm between Democrats and Republicans on the government's finances do not target the carried interest, a system that allows many private-equity and hedge fund owners to be taxed at the capital gains rate and not ordinary income tax rates.

An extension of assistance to the long-term unemployed is needed by Dec. 28, otherwise more than 1 million Americans could lose their benefits. Cutting those benefits would save $25 billion for the federal government, while further undermining the economic distress of those hit hardest by the Great Recession.

Unemployment insurance usually lasts 26 weeks, however, in the wake of the financial crisis federal and state lawmakers implemented policies that effectively extended the insurance to 99 weeks. Those could end if lawmakers don't approve another stopgap extension.

Such a callous move would come as cities like New York and Los Angeles report double-digit, year-over-year increases in homelessness.

While the poor and economically afflicted await a last-minute reprieve from Washington, private-equity and hedge fund managers taxed under a carried interest regime will have nothing to fret over this holiday season. Carried interest allows such funds to be taxed at the capital gains rate of 20%, even if they advertise to prospective investors that they are busy getting their hands dirty in making turnaround investments.

Increasing the carried interest tax rate to that of ordinary income tax rates is forecast as generating $16 billion in federal revenue, over a decade.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $131.78 0.00%
FB $80.14 0.00%
GOOG $539.78 0.00%
TSLA $251.45 0.00%
YHOO $43.07 0.00%

Markets

DOW 18,126.12 -36.87 -0.20%
S&P 500 2,120.79 -2.69 -0.13%
NASDAQ 5,097.9760 -8.6170 -0.17%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs