Trump’s populism takes hit from carried interest opponents

Trump’s populism takes hit from carried interest opponents
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The GOP tax-cut package that swept through the GOP Congress this week fulfilled a key pledge from President TrumpDonald John TrumpTrump threatens ex-intel official's clearance, citing comments on CNN Protesters topple Confederate monument on UNC campus Man wanted for threatening to shoot Trump spotted in Maryland MORE, who vowed to cut taxes during his presidential campaign.

But the package failed to eliminate a key deduction used by wealthy investment firms that Trump had vowed to kill, which is already sparking some disappointment and anger from populist supporters of the president.

Ann Coulter, an ally of Trump, slammed the president for the inclusion of the carried interest provision.

“For Trump to promise to end it everywhere he went, and then back down, is a very bad look,” Coulter tweeted. “Tax rates ought to at least have some bare minimum perception of fairness.”

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High-profile criticism also came from a host on Fox Business Network, Trish Regan, who slammed the tax plan on air and on Twitter this week. She called Trump out specifically for preserving the carried interest loophole for “private equity fat cats.”

Critics of the financial sector have long protested the carried interest deduction, arguing that wealthy investment managers already paid enormous salaries shouldn’t get a break on part of the income from their jobs.

Under current tax law, private equity, real estate and hedge fund managers pay a rate of roughly 24 percent on the money they earn from successful investments, instead of the roughly 40 percent top income tax rate — even if their total income would put them in the top tax bracket.

Trump promised to get ride of what he called the “carried interest loophole” during his campaign, saying those benefiting from the provision were “getting away with murder.”

But his tax-cut bill makes just a minor adjustment to the provision, amending it so that the lower 24 percent rate would only count for investments held for at least three years. That would allow private equity fund and real estate investment managers to file their earnings from interest at a lower rate, but exclude most hedge funds.

White House chief economic adviser Gary Cohn said Wednesday at an event hosted by Axios that Trump and his team “probably tried 25 times” to get rid of the carried interest deduction. 

Cohn, the former chief operating officer of investment bank Goldman Sachs, said Trump had pushed as recently as Monday to scrap the deduction, but was blocked by Republican House members from Democratic-leaning states.

The Washington Post reported Thursday that a group of lobbying firms representing fund managers had been meeting for months to rally enough lawmakers behind the carried interest deduction to save it.

Rep. Richard HudsonRichard Lane HudsonJordan weathering political storm, but headwinds remain US lawmakers celebrate the royal wedding May brings key primaries across nation MORE (R-N.C.), a member of the House GOP steering committee, rallied 21 other Republicans behind a June letter supporting the deduction to the leaders of the tax-writing House Ways and Means Committee. The block of support behind the carried interest provision so early in the process made it risky for leaders to scrap it, despite the insistence of Trump and his advisers.

The lobbying coalition behind the effort included the American Investment Coalition, the National Venture Capital Association and the Real Estate Roundtable, according to the Post, but not the Managed Funds Association, representing hedge funds that lose out with the new carried interest provision.

Top GOP leaders have sought to defend the provision.

House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyTreasury releases proposed rules on major part of Trump tax law Republicans happy to let Treasury pursue 0 billion tax cut Trump weighs big tax cut for rich: report MORE (R-Texas) was pressed on its inclusion during a MSNBC interview on “Morning Joe.” He insisted most Americans didn’t know or care about carried interest.

“Carried interest, we can talk about that for the next hour if you like, but for most Americans, they could care less about that,” Brady said. “They care about their paychecks and getting the economy going.”

“I think this is the perfect issue, the disconnect between Washington, New York and the American people,” he said.