May 18, 2017

Warren Questions Mnuchin on Tax Benefit for the Rich, Receives New Commitment from Treasury to Limit Eligibility for Proposed Business Rate

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Washington, D.C. - In a hearing before the Senate Committee on Banking, Housing and Urban Development today, United States Senator Elizabeth Warren (D-Mass.) questioned Treasury Secretary Steven Mnuchin about President Donald Trump's proposal to cut taxes on profits made by pass-through entities. Senator Warren explained that 70% of all income from pass-through entities goes to the top 1% of taxpayers, meaning the tax cut would benefit households making more than $450,000 per year.

As originally proposed, President Trump's pass-through proposal would help fewer than 5% of middle income taxpayers. In his response, Secretary Mnuchin committed to clear eligibility requirements that would limit the lower business rate to profits from small and mid-size businesses, and that could not be used by wealthy taxpayers.

Secretary Mnuchin's commitment to Senator Warren has significant implications for who stands to benefit from the President's tax reform proposal. For example, many hedge funds and private equity funds are organized as pass-through entities. Unless the Administration plans to designate hedge funds and private equity funds as small or medium sized businesses, the eligibility requirements Secretary Mnuchin described to Senator Warren would close off the lower business rate for partners in many Wall Street firms.