Warren, Baldwin, Lawmakers Challenge Trump to Close Carried Interest Loophole
Democratic lawmakers agree with Trump goal to close loophole, press Trump to demand Congressional Republicans eliminate it in tax bill
“You were an avid supporter of closing the carried interest loophole throughout your first campaign and during the first few months of your first administration…So, Mr. President, will you get it done?”
Washington, D.C. – U.S. Senators Elizabeth Warren (D-Mass.) and Tammy Baldwin (D-Wis.) led colleagues in sending a letter to President Donald Trump, challenging him to eliminate the carried interest loophole. Sens. Chris Van Hollen (D-Md.), Sheldon Whitehouse (D-R.I.), Jeff Merkley (D-Ore.), Ron Wyden (D-Ore.), Amy Klobuchar (D-Minn.), Jack Reed (D-R.I.), Peter Welch (D-Vt.), and Bernie Sanders (D-Vt.) joined in signing the letter.
“During your first campaign, you claimed that the carried interest loophole was ‘ridiculous’ and ‘unfair to American workers’ and that the individuals reaping the benefits from the loophole were ‘getting away with murder.’ We agree,” wrote the lawmakers. “We write to ask that you follow through on your promise to eliminate the carried interest loophole and demand that Congressional Republicans eliminate it in any tax bill they send to your desk.”
When private equity managers oversee an investment fund, they receive a 20% share of the profits earned from the funds’ investments, called “carried interest.” This interest is not subject to the ordinary income tax rate of 37%, and is instead taxed at the 20% capital gains rate as long as the investments are held for at least three years. As a result, private equity fund managers who routinely make hundreds of millions of dollars are subject to a tax rate lower than that of an average blue-collar worker.
“Despite the extraordinary profits that private equity funds are raking in each year, the carried interest loophole allows private equity managers to avoid paying their fair share of taxes, often paying tax rates that are lower than middle-class workers,” wrote the lawmakers.
Although he was an avid supporter of closing the carried interest loophole during his first term, President Trump failed to get it done. Now, he has another opportunity.
“You have once again confirmed your desire to end the loophole, and we understand that last week you asked Speaker Johnson to close the carried interest loophole. Notably, the House Ways and Means Committee defied your wishes and chose to advance legislation that does not eliminate the carried interest loophole,” wrote the lawmakers. “So, Mr. President, will you get it done?”
The massive loophole costs the federal government tens of billions of dollars in tax revenue, and the private equity industry regularly donates significant sums to politicians sympathetic to their cause in order to make sure the loophole remains open for their profit. The industry has donated almost $600 million to political campaigns over the last decade to maintain a loophole worth upwards of $63 billion over the next 10 years.
“It is clear that the private equity industry has fought hard to retain these extraordinary tax giveaways. What is less clear is whether you will allow your party to deviate from your commitments, bow to industry demands, and fail to close the loophole for a second time,” the lawmakers wrote to President Trump.
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