International Herald Tribune- Pension fund and tax experts told the U.S. Congress on Thursday that a proposal to more than double the tax rate of executives at private equity and hedge funds, whichinvest money from pension funds, would have a negligible effect on the returns provided to pensioners.
The experts said that although the pension funds hold investments of billions of dollars in such funds, those investments are a small component of the overall assets of the pension funds, amounting to less than 10 percent, according to recent studies. As a result, they said, any increase in taxes on the managers of the hedge funds and equity funds would have a negligible impact on the pension funds.
The testimony was significant because critics of the proposals have maintained that fund managers would pass on any tax increase to their investors – thus reducing the investment returns of the pension funds that millions of middle-income Americans rely upon for their retirement.
Earlier this year, senior lawmakers in the House and Senate introduced legislation to increase the tax rate of private equity and hedge funds. They are hoping to use tax gains to offset U.S. spending and reduce taxes in other areas, most notably a reduction in the alternative minimum tax.
