Who’s best (and who’s worst) for PE?

Buyouts analyzes the positions of the major presidential candidates to determine who’s best (and worst) for private equity

Private equity doesn’t like to remember the year of 2012, when the industry was rudely thrust into the harsh glare of a presidential political season.

The scar of the Mitt Romney presidential campaign may never truly heal, but the industry has moved forward.

This year, presidential contenders are going head-to-head on various issues that impact the industry. What follows is our handy guide to help you decided which candidate is coming for you, and which will stick by your side.

We researched media reports and the major candidates’ websites to figure out where each stands on four key issues:

• Capital gains tax: The short-term (under a year) capital gains rate is commensurate with regular income tax. Long-term capital gains are currently taxed at a maximum “preferential” rate of 23.8 percent.
• Carried interest:Fund managers receive a portion of a fund’s profits. If those profits are capital gains, a manager’s carry is taxed at the capital gains rate.
• Debt write-off:Firms can currently deduct the debt of assets they acquire when their stake will not produce future value.
• Dodd-Frank:The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 following the Global Financial Crisis. Its goal was stabilize the U.S. financial system by improving accountability and transparency and protect consumers from risky investments.

It’s not clear that any of these issues will change once a new president takes charge. For example, the carried interest debate has raged since at least 2007, but no changes have been made to the tax treatment despite numerous proposals.

Still, once someone emerges from the crowded field as the new leader of the country, it’ll be good to know where he or she stands on private equity.

JEB BUSH

Capital Gains Tax

Would cut the Preferential Capital Gains tax from 23.8 percent to 20 percent.

Carried Interest

Would tax carried interest in the high income tax bracket of 28 percent.

Debt Write-off

Would no longer allow interest payments on the debt firms acquire to be written-off.

Dodd-Frank

Would reform the Dodd-Frank act and halt government rules within business. Has pledged that with each new regulation put in place, an existing regulation will be eliminated.

HILLARY CLINTON

Capital Gains Tax

Gains with a holding period of one to two years would be subject to a 39.6 percent rate. Gains of two to three years would be subject to a 36 percent rate. The rate would decline by 4 percentage points per year after that, until reaching the long-term rate of 20 percent at six years.

Carried Interest

Would tax carried interest as regular income.

Debt Write-off

Not available.

Dodd-Frank

Would close the hedge fund-exempt loophole within the Dodd-Frank reform. Also, would look to place more oversight and regulations on banks, imposing extra fees on short-term funding as a deterrent to risky, fast-moving investments.

TED CRUZ

Capital Gains Tax

Would lower the rate on capital gains and dividend income to 10 percent.

Carried Interest

Would tax carried interest under the capital gains provision.

Debt Write-off

Not available.

Dodd-Frank

Would repeal Dodd-Frank. Has said the regulations are costly burdens on the financial sector.

MARCO RUBIO

Capital Gains Tax

Would reduce the rate on capital gains to zero after a one-time booking at the current rate.

Carried Interest

Unclear. The Washington Post reported that Rubio’s tax plan “makes provisions for eliminating carried interest.” In 2014, Rubio said he considered the impact of changing carried interest’s tax treatment “negligible.”

Debt Write-off

Would completely remove interest from the tax base. Interest income would no longer be taxable or deductible.

Dodd-Frank

Would repeal Dodd-Frank. Rubio voted against Dodd-Frank legislation at least four times.

BERNIE SANDERS

Capital Gains Tax

Would tax capital gains and dividends at ordinary income rates for households with incomes over $250,000.

Carried Interest

Would tax carried interest as regular income.

Debt Write-off

Unclear. However, Sanders’ tax plan specifically eliminates the deductibility of interest payments U.S. entities make to the ‘multinational corporations’ that own them.

Dodd-Frank

Wants to separate investment from commercial banking altogether.

DONALD TRUMP

Capital Gains Tax

Would cut the Preferential Capital Gains tax from 23.8 to 20 percent.

Carried Interest

Would do away with the carried interest provision, instead taxing it as regular income, with the top rate of 39.6 percent.

Debt Write-off

Has pledged to eliminate some “corporate loopholes” and deductions he said will be made unnecessary or redundant by new lower tax rates on corporations and business income. Trump also said he would phase in a cap on the deductibility of business interest expenses.

Dodd-Frank

Would repeal Dodd-Frank. Has said it is stifling the economy.

Vote 2016 photo courtesy of ShutterStock