Democrats formally propose higher tax on VCs, others

U.S. Congressman Sandy Levin (D-Michigan) has finally introduced the bill that venture capitalists were dreading: A higher tax on their profits.

If it passes, and there’s a possibility it may, it will change the tax treatment of “carried interest,” or profit that VCs and other investment professionals get from their investments. The change would tax that profit at a much higher rate — by treating it as ordinary income, rather than as capital gains, which draws a mere 15 percent tax rate.

Here’s Levin’s statement. The jargon can be tough for the uninitiated. Basically, the legislation would apply to any investment professional active in “alternative investments,” which refers to most forms of investment outside of stocks and bonds.

Here’s a PDF of the proposal.