If the American Jobs and Closing Tax Loopholes Act is passed there will be a lot of unhappy venture capitalists, who say they may stop investing in startups.
The new legislation, co-drafted by democratic senator Max Baucus and democratic congressman Sander Levin, aims to re-classify the returns fund managers and venture capitalists receive as ordinary income and not capital gains, as it has been for much of the last decade. This amounts to a much larger income-tax hit for VCs, jumping from 15 percent to nearly 40 percent.