WASHINGTON – White House hopeful Sen. Hillary Rodham Clinton yesterday called for sharply higher taxes on investment fund managers – a slap at Wall Street businesses in her own backyard.
Clinton’s move is a break with fellow New York Sen. Charles Schumer, but puts her on the same side of the issue as Democratic 2008 rivals Barack Obama and John Edwards.
“It offends our values as a nation when an investment manager making $50 million can pay a lower tax rate on her earned income than a teacher making $50,000 pays on her income,” Clinton said in a statement released by her campaign.
Clinton said a change is needed in current laws allowing investment managers to take large amounts of their compensation in the form of “carried interest,” which is taxed at the low 15 percent capital gains rate, rather than at income tax rates as high as 35 percent.
She pounded the “loophole” as a “glaring inequity.” The rule has drawn the ire of Democrats in Congress since last month’s $4.13 billion initial public offering by the private equity firm, Blackstone Group.
Political pros say Clinton’s push for the higher taxes is a nod to the Democratic Party’s left wing and a smack at her Wall Street constituents.
In her carefully worded statement, Clinton underscored the “important roles” that private equity and venture capital companies play in the economy.
But like Edwards, Clinton now supports taxing investment managers’ income – known as carried interest – at higher rates, while Obama backs classifying hedge funds and equity firms that go public as corporations, subjecting them to higher tax rates.
Clinton’s stance casts her in sharp contrast to Schumer, a member of the Senate Finance Committee, who is working to strike down any Democratic tax hikes for the sector.
Schumer told Bloomberg News that Congress “shouldn’t do anything” to “make it easier for capital and ideas to flow to London or anywhere else,” as he vowed to keep New York the financial capital of the world.
Clinton sought cover in her new position from billionaire investor Warren Buffett, who recently hosted a fund-raiser for Clinton and advocated boosting taxes for big earners and big business.
Venture capitalist Alan Patricof – a major Clinton donor – defended her new position.
“She feels that that’s the right thing to do,” he told Bloomberg News.