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Is Jeb Bush really anti-Wall Street?

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September 15
9:16 PM 2015

Jeb Bush in his latest speech and in his article in The Wall Street Journal (WSJ) came down heavily on 'Carried interest' of the corporate big shots while maintaining focus on tax structure. As part of the tax reform plan, his aim to using capital gains tax rate is also raising many eyebrows. Market analysts forecast that the move would pinch Wall Street's wallet significantly.

Jeb Bush, the Republican contender for the US President, is in reality chipping into carried interest with high tax rates can be compared with his father Sr Bush's "Read My Lips" pledge, recall economists. 

Going through what he wrote in an op-ed in the WSJ reads: "We will retain the deductibility of charitable contributions, but cap the deductions used by the wealthy and Washington special interests, enabling tax rate cuts across the board for everyone." Economists and market observers feel that Jeb Bush's plan to crack down on 'carried interest' may not get through.

Jeb Bush also wants to treat all non-investment income the same level. Unless someone puts money in the investment, he can't be able to claim the capital gains tax on market gains.

Jeb Bush will have to emerge out of 357 Republican candidates for President. Jeb Bush is availing services of same economic adviser, who served Mitt Romney, Republican candidate in 2012, Lowering individual and corporate rates, eliminating deductions, killing estate tax, etc, are mostly taken from Romney's plan. 

However, Jeb Bush is cautious in avoiding the image of supporting the rich. He says rich will have to shell out 5-10 percent more in the form of taxes. 

Bush's plans for tax provision to allow private equity and hedge funds will facilitate them to use the option of capital gains. This will result in lower tax rate for hedge funds and private equity firms (PE) also.

The proposed tax plan including dropping the top rate of 11.6 percent, keeping the preferred rate on long-term capital gains, dropping the estate tax and reducing the itemized deductions are actually something on which rich taxpayers are not dependent much. So reading between the lines-- In reality there would be some shift of burden on rich to middle-class. 

The limiting the current seven-rate system into three slabs-- 10%, 25%, and 28%-- as proposed by Jeb Bush, will eventually favor the rich. The 28 percent top rate on income and 20 percent top rate on long-term capital gains, interests and dividends are expected to be a huge windfall to the rich. 

And coming to 'carried interest,' considered to be the lifeblood of private equity and venture capitalists (VC). Observers term this is an effort to keep himself stay ahead among the overcrowded contenders for President election. This is more unlikely to be implemented. The repeated move is aimed at attracting the attention of blue-collar voters, who're in dark about the constituency.  

Many investment banks, private equity firms, venture capitalists are pouring millions of dollars into election campaigns. Considering this factor, the implementation of 'carried interest' is more unlikely, observe market-watchers.

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