Various politicians have been working to close a number of loopholes that allowed for a number of bad investment decisions. While we can debate whether there is too much (or not enough) government regulation in the financial markets, the implementation for the identified problem has some serious issues.
The bill passed by the House groups hedge funds (their target) with much of the venture capital markets and will tax part of the money they earn from profits from investments as standard income. Venture funding and hedge funds operate very differently and serve different purposes, but apparently many of our legislators cannot be concerned with the details.
This change will have cause a significant increase in taxes for the venture markets. Will it stop venture funding? No. Will it devastate the entire venture market? Not likely, although many have tried to claim that VC’s will close doors across the country. Will we see a further tightening of the requirements for venture funding and a reduction in overall innovation? Yes.