AIC & Punchbowl News Host Event with Rep. August Pfluger (R-TX) Discussing How Private Capital is Investing in America
Rep. Pfluger: “We are only energy dominant because of provisions like carried interest.”
WASHINGTON, D.C. – Yesterday, the American Investment Council sponsored an event hosted by Punchbowl News spotlighting how private equity investments are supporting American energy dominance and small businesses. Punchbowl News founder Jake Sherman interviewed Representative August Pfluger (R-TX) about the strong partnership between private capital, small businesses, and energy producers in Texas. Jake then spoke with Drew Maloney, President & CEO of AIC, and Bobby Franklin, President and CEO of the National Venture Capital Association (NVCA), about the need for Congress to pass pro-growth tax reform that preserves carried interest capital gains and empowers small businesses, stimulates economic development, and maintains American competitiveness.
Carried Interest is “Fundamental” to American Energy Dominance
When asked about how private equity and carried interest fuel investment and innovation in the energy sector, Rep. Pfluger (R-TX) said, “I think that [carried interest] has been fundamental to the energy sector. It’s been fundamental to the investment we’ve seen and the fact that we are now energy dominant. … Drilling is extremely capital intensive, and you have to be incentivized some way through the tax code … We are only energy dominant because of provisions like carried interest in the Permian Basin.”
Private equity investments are fundamental to supporting American workers and businesses in Rep. Pfluger’s district in Texas. Private equity invested more than $73.2 billion in the Lone Star State in 2024, supporting 732 Texas businesses including many in the energy sector. Rep. Pfluger (R-TX) also said, “Private investment, especially in energy in the past six to seven years, has been the name of the game … the only source of investment was private money.”
Rep. Pfluger (R-TX) concluded by calling on his colleagues to make pro-growth provisions of the Tax Cuts and Jobs Act (TCJA) permanent, “The market needs predictability in the tax code. This is the Senate wanting to make permanent these provisions in the tax code [like carried interest], which I agree with.”
Raising Taxes on Carried Interest Would Increase the Deficit and Kill Jobs
AIC President and CEO Drew Maloney discussed the risks of raising taxes on carried interest capital gains, “The more you tax something, the less there is of it. … [We] would lose $70 billion in revenue to the Treasury. That’s not the right way we need to go now. So, that’s the first point. The second point is you’d lose more than a million jobs, and that’s also not the right way you want to go because there’s going to be less investment dollars out there. The third point to make on that is, if you take the tax rate from 23.8% to 40.8%, you’re going to become a global outlier.”
Pro-Growth Changes to the TCJA Supported Small Businesses and Manufacturing
Drew Maloney also spotlighted how the 2017 Tax Cuts and Jobs Act (TCJA) struck the right balance on carried interest capital gains treatment and encouraged long-term local investment, innovation, and economic growth, “We’re very supportive of an extension of the Tax Cuts and Jobs Act as is. If you look back at when it passed to today, the private equity industry has invested more than $5 trillion in the economy, and as I said, 85% of dollars are going to small business. The second largest investment is the reshoring of manufacturing. A big chunk of our money is going to the manufacturing.”
Carried Interest Powers Investments in American Small Businesses
Drew Maloney also discussed how taxing carried interest as ordinary income would negatively affect the ability of private equity to support small businesses in communities across America, “I think what you see is the smaller firms, the smaller investments, the more risky investments, won’t be made, because you won’t get the return…you don’t get a carried interest if the company doesn’t succeed. So, you’re going to only start going to safer companies, and then those more risky companies, and some of those risky companies could have been Uber, could have been Google.”
Carried Interest Incentivizes Long-Term Investments in Innovative Start-Ups
Bobby Franklin, President and CEO of the National Venture Capital Association, discussed how carried interest encourages investors to make early-stage, long-term investments in innovative start-ups, “Your only economic incentive [to invest] is carried interest. So, imagine working for, on average, eight years on a lot of portfolio companies. There’s no guarantee it’s going to win. In fact, there’s studies that show 75% of capital investors and investments go to zero … It’s the 25% that hit, and you hope they hit really big, that make up the difference. So, there’s no guarantee you get this, so that it’s not like some bonus that they talk about. It’s like a real risky endeavor, and if suddenly you were taxed at ordinary income rate –– like Drew said, you tax it, you get less of it.”
Earlier this week, Dr. Charles Swenson from the University of Southern California Marshall School of Business released a new report outlining how raising taxes on carried interest capital gains would increase the deficit, kill jobs, slow housing construction & threaten American innovation.
Click here to watch the full event hosted by Punchbowl News.
