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Giuliani, Hillary Mull Tax on Hedge Funds
Republican presidential front-runner Rudolph Giuliani, an avid tax cut advocate, and leading Democratic contenders are studying a Senate proposal to double the tax rate on publicly-traded equity firms and hedge funds, their campaigns said on Monday. Their cautious approach comes as hedge funds and private equity firms have been big financial supporters of both Republican and Democratic 2008 presidential candidates. Arizona Sen. John McCain, who is trailing Giuliani, opposes the idea to boost the tax rate to as much as 35 percent from 15 percent, his campaign said. Former Massachusetts Gov. Mitt Romney's campaign did not respond to requests for comment. Senate Finance Committee Chairman Max Baucus and the ranking Republican Chuck Grassley have introduced a bill that would force partnerships like private equity firms and hedge funds that go public to pay the same tax rate as other public companies.
Story Continues Below Firms that have already gone public such as Fortress Investment Group LLC or have filed to do so before mid-June, such as Blackstone Group, would be exempt from the tax increase for five years under the proposed legislation. Giuliani, the former mayor of New York where many hedge funds and equity firms are headquartered, is "still reviewing the proposal," his spokeswoman Maria Comella said. His top contributors included employees at the hedge fund Elliott Management, who gave him $195,800, according to the Center for Responsive Politics, a non-partisan group that tracks money in politics. Romney, before entering politics, helped found the private equity firm Bain Capital. In the first quarter of 2007, Romney raised about $100,000 for his campaign from his former colleagues at the company. Meanwhile, the leading Democratic candidates struck a cautious tone about the proposal. Two said they were studying it and another one leaning towards supporting it. Front-runner Sen. Hillary Rodham Clinton "believes there are broad concerns surrounding private equity in relation to the rest of the market that need to be examined and she is evaluating this and other proposals," her Senate spokesman said. Clinton has raised more than $100,000 in campaign donations from firms such as Farallon Capital Management and Avenue Capital Group, where her daughter Chelsea reportedly now works. John Edwards, the 2004 Democratic vice presidential candidate who is again seeking his party's top nomination in 2008, previously worked as an adviser to Fortress. Employees there donated more than $180,000 in the first quarter. "Edwards is closely examining the tax treatment of hedge funds and private equity firms, but hasn't taken a position on this piece of legislation," said spokeswoman Colleen Murray. A spokesman for Illinois Sen. Barack Obama, a presidential candidate, said last week he is "inclined to support it, based on what we've seen so far."
© Reuters 2007.
Editor's note:
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