On Sept. 6, the carried interest tax loophole took center stage, featuring a four-panel, 20-witness marathon hearing in the House Ways and Means Committee and the third hearing this year on the topic in the Senate Finance Committee. The day before the hearings, over 300 national, state and local nonprofit organizations sent a letter to Congress urging it to close the loophole in order to bring equity to the tax code. By day's end, deep divisions had emerged among private equity and other fund managers, with an increasing number now openly supporting H.R. 2834, a bill introduced by Rep. Sander Levin (D-MI). The Levin bill would require fund managers to pay tax on their partnerships' carried interest income at ordinary rates of up to 35 percent, rather than the 15 percent capital gains rate they now pay. During the hearing, the Levin bill appeared to gain traction among committee members, particularly if it is paired with an effort to reform or patch the Alternative Minimum Tax. Indeed, many of the arguments offered at the hearing by beneficiaries of the special carried interest tax break were countered by other such beneficiaries. In the words of one, William D. Stanfill, a founding partner of TrailHead Ventures, "I don't think it's fair for those teachers and firefighters to subsidize special tax breaks for me and other venture capitalists … or for private equity and hedge fund managers." Those testifying in defense of the preferential tax treatment warned of dire economic consequences for the United States, should the loophole be closed. Bruce E. Rosenblum, managing director of the Carlyle Group and chairman of an industry lobbying organization, said, "There is no inequity in the current taxation of capital gains attributable to carried interest. Fairness requires that the tax code not single out certain investors for less favorable treatment." Another, Jonathan Silver, managing director of Core Capital Partners, told the committee that the Levin bill would hurt the nation's global competitiveness by raising taxes on investors and "fundamentally change the venture capital business." But others in the business pointed out that the Levin bill has no impact on investors as such, only on fund managers, and that fund managers had indeed been singled out — and given a special tax subsidy enjoyed by no other profession. Leo Hindery Jr., managing partner at a private equity fund, InterMedia Partners, disputed Rosenblum and Silver's claims, telling the committee that the industry had taken advantage of a "tax loophole the size of a Mack truck … Congress, starting with this committee, needs to tax money management income, what we call carried interest, as what it is … plain old ordinary income." He called the argument that the bill would hurt the economy "self-serving ... complete poppycock." Testimony at the Senate Finance Committee hearing similarly dismissed concerns the Levin bill will reduce returns to state pension plans, many of which are partially invested in hedge funds. Professor Alan Auerbach said in his testimony that while affects are difficult to predict, he thought state pension funds "might see a decline in returns of one basis point, or one-one hundredth of one percent." The pension fund investment industry involves trillions of dollars, Auerbach said. Managers of public employee pension funds also testified at the hearing that claims about the Levin bill's potential affects on such funds are overstated. Russell Read, the Chief Investment Officer of the California state pension fund, the largest public pension fund in the country, said he could not predict what the effect of the Levin bill might be on the pension fund's investments. Further, a representative from the New York state pension fund said he highly doubted a different tax structure would discourage people from working at hedge funds. Additionally, the National Conference on Public Employee Retirement Systems retracted a statement it had made opposing the Levin bill at a prior Senate hearing, after many of their members pressured the conference's leadership for the retraction. Although it has developed momentum through the summer, the fate of the Levin bill could be bound up with efforts afoot to eliminate the Alternative Minimum Tax (AMT) or to pass an AMT "patch," which would hold the number of taxpayers liable under the AMT steady for one or two years. Ways and Means Committee Chair Charles Rangel (D-NY), asked if he would support a one-year patch while working on a larger repeal bill, replied ($), "You do what you have to do, but that is not on the radar screen at all." Rangel said he would look to the Levin bill to help pay for the expensive ten-year, $800 billion AMT repeal or for a $60 billion one-year patch he implied he might "have to do." This would not only help AMT legislation comply with Congress' new PAYGO requirements, but would also offer a way to simplify and bring equity to the tax code.