In its proposed budget, the White House recommends effectively raising the tax rate on hedge fund managers from 15% to almost 40%. Many Hill Democrats and Republicans back the move. But in a striking stretch of logic, Republican Whip Rep. Eric Cantor recently said increasing the tax would cut off "the lifeblood of small business." Bob McIntyre, head of the nonpartisan group Citizens for Tax Justice disagreed. He said the President's proposal would not affect small business.
Under the current system, some billionaire hedge fund managers pay a lower tax rate than average workers, like schoolteachers or firemen. Last time Congress tried to close the loophole, in 2007, Cantor held closed-door meetings with lobbyists to try to block the move. In the end, the proposal got through the House but couldn't pass the Senate.
The prospects of passage are better this time, unless Cantor can whip up enough opposition.