VC-backed Firms Outpace Average Firm by 133%

Last Updated Oct 15, 2007 4:48 PM EDT

Venture Capital image by Spierzchala [cc, 2.0]In the midst of all the congressional hoopla about a new law that may raise the carried interest tax rate, a number of firms are defending their own -- most notably venture capital firms. In the battle to slay the anti-carried interest camp, the National Venture Capital Association has pulled up some intriguing stats. The message? Don't destroy the most profitable and entrepreneurial of American enterprises. The NVCA says that VC-backed firms outperform the private sector in annual sales by 133%; VC-backed firms also add 17% to the American GDP and contribute three times the job growth.

On the other hand, congressional members supporting the measure say that the tax increase is reasonable and necessary to reign in the rising breakdown of the middle class. Currently, managers at hedge funds, private equity firms, and partnerships -- who may make millions -- pay a lower tax rate than the average school teacher or police officer.

In response, came the lobbyists -- quite an army of them, too. Private Equity groups in particular have spent $5.5 million this year alone in Washington -- nearly four times what they spent last year. In the end, the the lobbyist dollars may have gained their traction; Senate Majority Leader Harry Reid (D-Nev) says that the measure likely won't pass this year, and many analysts doubt if it ever will.

Venture Capital image by Spierzchala [cc, 2.0]