Tuesday, May 11, 2021
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Venture capitalist Alan Patricof: Capital gains tax hike would not change investor behavior

Alan Patricof, a longtime tech investor and Democratic donor, informed CNBC on Monday he’s not involved in regards to the prospect of upper capital gains taxes for rich Americans.

In an interview on “Closing Bell,” the co-founder of enterprise capital agency Greycroft did not throw his help behind a selected price for the capital gains tax. He additionally recommended the proposal just lately put out by President Joe Biden will probably “be modified in some way” after negotiations in Congress, the place Republicans have expressed opposition.

However, Patricof mentioned behavior is unlikely to be swayed by a capital gains tax improve, notably because it pertains to investing in younger firms. Some enterprise capitalists, comparable to Tim Draper, have contended that Biden’s proposal might negatively impression Silicon Valley.

“I believe that the amount of money that will be put into start-ups will be just as strong as it is now,”  Patricof mentioned. “Entrepreneurs are not going to stop and say, ‘Gee whiz, the capital gains rate is going up. I better not start my company.'”

“Venture capitalists like me are not all of a sudden going to turn their money back into their funds and say, ‘Gee whiz, the rate is going up, so we can’t justify making investments anymore,” added Patricof, an early investor in Apple and AOL.

Biden’s current proposal requires elevating the tax price on long-term capital gains to 39.6% from 20% for Americans who’ve an annual revenue of greater than $1 million. The 3.8% web funding revenue tax that is already legislation would successfully carry the highest price to 43.4%.

Biden’s American Families Plan additionally requires elevating the highest revenue tax price to 39.6% from 37%.

Additionally, a White House reality sheet for the plan says that Biden “is also calling on Congress to close the carried interest loophole,” which advantages managers of hedge funds, enterprise capital funds and personal fairness funds.

Patricof, whose venture-capital profession has stretched over 40 years, has lengthy advocated for the elimination of the carried-interest loophole, together with in a 2016 opinion article for The New York Times.

Patricof informed CNBC he believes narrowing the differential in tax charges on wages and capital gains was “constructive,” with out particularly saying whether or not he thought they need to be positioned on the similar stage.

“I think that investors in general are going to invest their money the way they have before, and I think that new companies will be started. I think that funds will be formed. Private equity will prosper,” Patricof mentioned.

“I think you’ve seen it in the market,” he added. “I mean, the market is not collapsing because of his announced [proposed] change in rate. Everyone is expecting that the capital gains rate is going to go up. I don’t think it’s going to change behavior.”

Patricof donated 1000’s of {dollars} to Biden’s 2020 presidential marketing campaign, in addition to to the Biden Victory Fund, a joint fundraising committee, based on Federal Election Commission data.

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