Under proposals currently being scrutinized by the US Senate, private equity firms would be compelled to pay tax on long-term investments at the standard income rate of 35 per cent. The firms currently pay 15 per cent on long-term investments.
However, according to Bruce Rosenblaum, a managing director with Carlyle and chairman of the Private Equity Council, the tax increase could prompt private equity investors to move their operations overseas.
As a result, US firms would receive reduced levels of investment, he said.
If the proposals were to become law, "there will be deals that won't be done, entrepreneurs who won't get funded and turnarounds that won't be undertaken", Mr Rosenblaum told the Senate.
Mr Rosenblaum also claimed that the taxes would result in pension funds returning lower yields, since these account for around almost half of private equity fund investors.