A popular tax break among investment fund managers and especially private equity partners is a top target for Democrats seeking to shine a spotlight on wealthy tax avoidance.
Sen. Tammy Baldwin (D-Wis.) and more than a dozen Senate Democrat colleagues Thursday reintroduced legislation ending the break on carried interest. The break allows investment managers to pay the lower capital gains tax rate of up to 23.8% on income received as compensation, instead of the ordinary income tax rate of up to 40.8% they’d pay for the same amount of wage income.
President Donald Trump has long talked about ending the carried interest break. He included it in a list of tax priorities Thursday during a meeting with GOP lawmakers as they discussed what to include in a sweeping tax bill. Expanding the state and local tax deduction also came up during that meeting.
Democrats have been looking to exert influence at the margins as Republicans seek renewal of the 2017 tax law without their help. Rep. Marie Gluesenkamp Perez (D-Wash.) is expected to introduce companion legislation in the House.
Before Trump laid out his agenda Thursday, Baldwin pointed to his first term when he vowed to get rid of the break even though it was ultimately left out of the 2017 tax bill.
“As President Trump has previously said, this loophole is ‘unfair to American workers’ and I look forward to working with him to finally close it,” she said.
A narrower provision targeting carried interest was initially included in a version of the Democrats’ 2022 tax-and-climate law, but it was nixed at the request of former Sen. Kyrsten Sinema (I-Ariz.) to get her vote.
(Updated in 3rd graph with details of a White House meeting in which tax priorities were discussed. )
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