Presidential Tax Proposals: Key Impacts on Private Equity and Venture Capital Firms

Presidential Tax Proposals: Key Impacts on Private Equity and Venture Capital Firms

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As the 2024 presidential election approaches, private equity (PE) and venture capital (VC) firms are closely watching the tax policies proposed by the leading candidates. These proposals — containing two starkly different approaches — could significantly affect the tax environment for investors and fund managers.

Below is an overview of the key tax proposals from candidates Vice President Kamala Harris and former President Donald Trump that could impact the PE/VC sector.

Harris Tax Proposals

Vice President Kamala Harris’s proposed tax changes target high earners and corporations, aiming to reduce income inequality while increasing government revenue.

Key elements of her platform affecting PE/VC firms and their investors include:

Carried Interest Taxation: Harris proposes to tax all sales of carried interest and all distributions received from carried interests as ordinary income. This change would apply to partners with taxable income exceeding $400,000 or $450,000 for married couples attributable to partnership interests, and the income would also be subject to self-employment taxes. Harris’s proposal also includes an increase of the additional Medicare tax from 0.9% to 2.1%, which would be imposed on self-employment income over $400,000.

Individual Taxation: Harris proposes reverting the maximum individual income tax rate on ordinary income back to 39.6%, as it was prior to the enactment of the Tax Cuts and Jobs Act (TCJA). Given the proposed application of self-employment taxes and the additional Medicare tax, individuals earning carried interest income would be subject to an increased federal tax rate of approximately 44% on their taxable income related to a carried interest.

Capital Gains and Dividend Taxes: Harris proposes raising the long-term capital gains tax rate to 28% for taxpayers with taxable income exceeding $1 million, compared to the current rate of 20%. Further, her proposal includes an increase of the net investment income tax (NIIT) from 3.8% to 5% on income above $400,000. As a result, the combined federal capital gains tax could rise to 33% for these high-income taxpayers.

Harris initially supported President Biden’s 2025 tax proposal, released in March 2024, which included a minimum tax of 25% on total income, generally inclusive of unrealized capital gains, for all taxpayers with wealth greater than $100 million. Most recently, Harris has declined to provide specifics about that proposal or comment directly on how unrealized gains would be treated.

Corporate Tax Changes: Harris plans to increase the corporate tax rate to 28%, up from the current 21%, and raise the corporate alternative minimum tax to 21% from 15%. Additionally, she intends to levy a 4% tax on stock buybacks, up from the current 1% and restrict deductions for compensation exceeding $1 million paid to any employee of a C corporation. These proposals would result in a higher tax drag for investments in corporate portfolio companies and structures involving blocker corporations. Harris also proposes increasing small business start-up expense deductions from $5,000 to $50,000 and targets tax credit incentives for certain industries such as affordable housing.

Estate and Gift Tax Reforms: Harris seeks to treat the transfer of appreciated property by gift or death as a taxable event (a "realization event") and supports estate tax reforms calling for progressive tax rates, reduced estate tax exemption thresholds and limited annual gift tax exclusions. These changes would significantly limit taxpayers’ options to transfer appreciated partnership interests in a tax-efficient manner.

Trump Tax Proposals

Former President Donald Trump’s tax agenda centers on continuing and expanding the tax cuts implemented under the Tax Cuts and Jobs Act (TCJA). His platform focuses on reducing taxes for corporations and individuals to stimulate economic growth.

Extension of TCJA Provisions: Trump aims to make the TCJA tax cuts permanent, including maintaining the highest marginal income tax rate at 37% and retaining the 0%, 15% and 20% long-term capital gains and qualified dividend tax rates. He also supports preserving the 3.8% NIIT rate.

Individual Taxation: Trump proposes to eliminate or increase the $10,000 cap on the state and local tax (SALT) deduction.

Corporate Tax Rate Reduction: Trump proposes reducing the corporate tax rate to 20% from 21%. He has also proposes lowering the corporate tax rate to 15% for corporations that make their products in America.

Estate Tax Exemptions: Trump plans to extend the increased estate tax exemptions under the TCJA, which allows individuals to pass on up to $13.61 million tax-free and $27.22 million for married couples.

Tariffs on Imported Goods: A key component of Trump’s tax strategy is a proposed minimum 10% universal baseline tariff on all imported goods, with a 60% tariff on Chinese imports.

The Bottom Line for PE/VC Firms

For PE/VC firms, the outcome of the 2024 presidential election could shape the future of tax planning and investment strategy. Leaders must stay informed and prepare for potential changes impacting their operations and profitability.

Please download our election guide for a more in-depth look at the presidential candidates’ positions on key tax issues.

If you have any questions regarding the presidential tax proposals and their potential impact on your business, our PE/VC team of experts at CBIZ is here to help. Connect with us for personalized guidance and assistance with all your tax needs now and in the future.


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Presidential Tax Proposals: Key Impacts on Private Equity and Venture Capital Firmshttps://www.cbiz.com/Portals/0/Images/FSArticle_Presidential Tax Proposals Key Impacts on Private Equity and Venture Capit_Hero-1920x1000.jpg?ver=Mu5Fk9r9e_xFuKKf2MeoqQ%3d%3dhttps://www.cbiz.com/Portals/0/Images/FSArticle_Presidential Tax Proposals Key Impacts on Private Equity and Venture Cap_Thumbnail-300x200.jpg?ver=pqtqadOQHeDZPZpp4FShWA%3d%3dDiscover how the 2024 presidential tax proposals could shape the investment landscape for private equity and venture capital firms. Learn about crucial policy shifts and their potential influence.2024-10-29T17:00:00-05:00Discover how the 2024 presidential tax proposals could shape the investment landscape for private equity and venture capital firms. Learn about crucial policy shifts and their potential influence.Planning & Tax MinimizationPrivate EquityFederal TaxYes