Millionaires back Dems in call for end to tax 'loophole'

Millionaires back Dems in call for end to tax 'loophole'

Rep. Sander Levin (D-Mich.), Sen. Tammy BaldwinTammy Suzanne BaldwinWorld passes 3 million coronavirus deaths Democratic senators call on Biden to support waiving vaccine patents Mary Trump joining group that supports LGBTQ+ female candidates MORE (D-Wis.) and a group of millionaires made a push on Wednesday for consideration of legislation to close the carried-interest tax "loophole."

“We have to eliminate this loophole to make that sure everyone is paying their fair share and especially so that we can invest in an economy that creates jobs and lifts working American wages,” Baldwin said during a news conference on Capitol Hill. 

Carried interest is the share of profits taken by managers of investment funds — such as private-equity funds, hedge funds and real-estate funds — for providing the service of managing the funds’ assets.


The carried interest tax break is “the most egregious example of tax unfairness,” said Morris Pearl, chair of the Patriotic Millionaires — a group of 200 Americans with annual incomes of at least $1 million and/or assets of at least $5 million.

In June, Baldwin and Levin introduced legislation called the Carried Interest Fairness Act of 2015 that would tax carried interest at ordinary income rates, which can be as high as 39.6 percent, rather than at long-term capitol gains rates, which top out at 23.8 percent.

Baldwin’s and Levin’s bill would tax carried interest at ordinary income tax rates regardless of the type of assets being managed. Fund managers would still be able to pay taxes at the capital gains rate for their allocation of capital gain income that represents a return on the money they invested.

The Joint Committee on Taxation has estimated that the legislation would raise about $15.6 billion over 10 years. Levin and Baldwin said that this estimate is conservative and that there is growing bipartisan consensus on the issue.

Republican presidential candidates including Donald TrumpDonald TrumpHouse votes to condemn Chinese government over Hong Kong Former Vice President Walter Mondale dies at age 93 White House readies for Chauvin verdict MORE and Jeb Bush oppose the carried interest tax break. But key congressional Republicans are not interested in taking immediate action on the issue.

“I think what’s happening in the presidential race is there’s more and more attention to what’s happening to the middle class of this country,” Levin said. He added that new Speaker Paul RyanPaul Davis RyanOn The Money: Senate confirms Gensler to lead SEC | Senate GOP to face off over earmarks next week | Top Republican on House tax panel to retire Trump faces test of power with early endorsements Lobbying world MORE (R-Wis.) “needs to be asked” about the carried interest issue.

Some in the financial sector, meanwhile, defended existing rules — and warned that a change could have negative impacts.
"Disrupting this long-standing tax law would make our tax code less fair and would have ramifications well beyond private equity funds, adversely affecting the treatment of start-up ventures, small businesses, interests in real estate and natural resources, and other enterprises," argued James Maloney, spokesman for the Private Equity Growth Capital Council. 
This story was updated at 7:02 p.m.