Extender bill will be a hard sell in the Senate

Members on both sides of the aisle are concerned that the provision will create a fair amount of political resistance to the bill. 

"There always a chance with tax policy that you're going to get a backlash on one side of the aisle or the other and it could [sink] the extenders package," Sen. Mark Prior (D-Ark.) told The Hill, adding, "But I do trust [tax writers'] judgment to try to put something together that they feel like they could get 60 votes for."

Democratic leaders need at least 1 Republican senator to cross the aisle and support the bill. Sen. Chuck GrassleyCharles (Chuck) Ernest GrassleyBooker, Sanders propose new federal agency to control drug prices GOP eager for report on alleged FBI surveillance abuse Johnson opens door to subpoenaing whistleblower, Schiff, Bidens MORE (R-Iowa), the ranking member on Senate Finance, told The Hill achieving that feat is a tall order because of how the legislation treats carried interest.


"I think it will be difficult," he said. 

Grassley has also not been a part of any discussions on the bill. 

"They're seeing what they can work out among the Democrats, first, between the Ways and Means Committee and Baucus' staff," he said. 

Grassley is withholding judgement on the bill until he sees all its details. Sen. Ron WydenRonald (Ron) Lee WydenDemocratic senators introduce bill to block funding for border wall live stream Booker, Sanders propose new federal agency to control drug prices Hillicon Valley: Amazon to challenge Pentagon cloud contract in court | State antitrust investigation into Google expands | Intel agencies no longer collecting location data without warrant MORE (D-Ore.) is also taking a wait-and-see approach to the legislation. 

"The rate [on] carried interest seems to change every 30 minutes," Wyden said. "I'll wait to review the latest proposal." 

Some expect the bill to initially create a three-tiered tax system for carried interest before it is taxed as ordinary income. Under the plan provided to The Hill, real estate would incur a 25 percent tax, venture capital and private equity would absorb a 28 percent tax, and hedge funds would be hit with a 35 percent tax.

"A lot of hedge funds have gone belly up," he told The Hill. "Some others aren't doing as well as they should and others are doing well. And one reason they can survive is if we don't raise taxes." 

Prior agreed that a tax increase on  carried interest could negatively affect the market.

"It could," he said. "It certainly could."