BET founder opposes tax increase on carried interest

Robert Johnson, founder of Black Entertainment Television, on Tuesday said a tax increase on carried interest that is included in pending legislation extending several measures, will be detrimental to minority-owned businesses.

"In my opinion, this legislation would cause a rapid decline in minority private equity firms and possibly eliminate minority participation in this important financial sector of the American economy," he said in prepared remarks. "Minority firms have difficult challenges in attracting fund investors and an even more difficult time attracting top managerial talent. If this legislation is approved, it will become even more daunting for minority firms."

Opposition on Capitol Hill to the tax increase on carried interest is both bipartisan and bicameral.

Still, House Ways and Means Chairman Sandy Levin (D-Mich.) said despite the pushback the tax increase will remain in the bill.

"We've already worked hard to balance all of the needs, here," he told reporters, adding, "It's a compromise and I think it's one that keeps faith with what is a basic principle of equity. All kinds of people risk their time. And when they get a profit for it they pay ordinary income tax."

Johnson argues that historically it takes more time for minority firms to raise capital, and even then the amount raised is usually less than what is achieved by larger firms. This disparity makes to harder for minority firms to attract talent, he said, and a tax increase on carried interest would only add to that burden. 

"If taxes are raised on minority companies, the same as it exists for larger firms, talented minority men and women would likely choose to stay at their existing firms," Johnson said. "Furthermore, if minority firms can't hire the best and the brightest, corporate and union pension funds that are already skeptical of the effectiveness of minority private equity funds would likely decrease their investment in these funds due to the lack of 'experienced and talented fund managers.'"

Johnson predicted the impact would be felt in urban areas, where job creation and economic development is needed.

"To enact the proposed legislation would be devastating to minority private equity firms across the county, undermining current efforts to rebuild and grow our economy," he said. 

Democratic leaders hope to pass the extender bill before adjourning for the Memorial Day recess.