WASHINGTON (Reuters) - David Rubenstein, a billionaire co-founder of the private equity firm Carlyle Group, on Monday defended the lower rate of taxation enjoyed by private equity managers, saying they are merely following the laws that Congress wrote.
Asked about the carried interest tax break and whether it should be continued even though it is “privileged” over other tax rates, including those on wages, Rubenstein told an audience of institutional investors: “It’s not for me to say what the laws are. I don’t write the tax laws.”
Speaking at a conference in Washington held by the Council of Institutional Investors, Rubenstein said he thinks lawmakers will eventually address the carried interest tax issue, but that it won’t get resolved until the next Congress.
He added that it is “a little unfair” when people accuse his industry of not paying its fair share of taxes.
“I‘m paying what I‘m supposed to pay. Change the law, I’ll pay whatever I‘m supposed to pay,” he said.
For years, Congress has debated whether to change the carried interest tax break that lets executives of private equity firms and some hedge funds pay the 15 percent capital gains tax on a large portion of their earnings, rather than the top ordinary income tax of 35 percent.
The issue has been front-and-center in recent months as Republican presidential candidate and former private equity executive Mitt Romney has come under fire for his lower tax rate.
Democrats have often made the carried interest provision in the U.S. tax code a target, saying it is unfair to the average American. Multibillionaire Warren Buffett has backed changing the tax structure, saying it is unfair that his assistant pays a higher tax rate than he does.
But the private equity industry generally has resisted efforts to change the carried interest tax rate, and so far has been successful.
Rubenstein told the audience that he believes the overall tax system in the United States is a “disgrace” and creates inequities that must be rectified.
“We have 10,000 pages of tax code. Nobody can understand it,” he said. “Virtually no one can fill out their own tax returns.”
At the same time, he expressed little optimism that Congress will do much about it in the very near term.
“Congress right now is at loggerheads,” he said. He predicted that the only progress on tax reform before next January’s new Congress would be to address the scheduled expiration of the tax cuts the Bush administration enacted.
At the same time that Rubenstein defended private equity managers’ tax rate, he also spoke about his own efforts to give much of his money away to charity.
He said he is the only person in the private equity world to sign the so-called “giving pledge,” a promise by wealthy Americans to give the bulk of their money to charity. That pledge has been signed by other wealthy individuals including Buffett, Bill and Melinda Gates and Mark Zuckerberg.
“I want to have given it all away by the time I die,” he said, receiving applause from the institutional investor audience.
The Council of Institutional Investors describes itself as a nonprofit, nonpartisan association of pension funds and other employee benefit funds, foundations and endowments with combined assets exceeding $3 trillion. It says it is a leading voice for good corporate governance and strong shareowner rights.
Reporting by Sarah N. Lynch; Additional reporting by Kim Dixon; Editing by Gary Hill