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Nearly a month has passed since President Trump last spoke publicly of his desire to kill the carried interest loophole. And yet the private equity industry, which stands to lose big if the president upends the tax break, is still bracing for a fight.
This is the biggest challenge to the provision since it was nearly neutered three years ago under former President Joe Biden, Grady McGregor writes for DealBook.
The carried interest rule means that executives at hedge funds and P.E. and venture capital firms pay roughly 20% tax on their profits, a rate that’s so low it’s drawn criticism from Warren Buffett and from progressive senators like Elizabeth Warren, Democrat of Massachusetts.
One Washington lawyer described the lobbying effort to DealBook as “significant,” a sign of the escalating stakes.
The American Investment Council, the private equity lobbying group, is reportedly circulating memos on Capitol Hill reminding lawmakers that private equity is a jobs creator. Venture capitalists, seemingly omnipresent in Trump’s Washington, grumble that they have to keep returning to Congress to “educate lawmakers” about the rule’s benefits. So-called free market groups, meanwhile, have banded together to ask Congress to maintain the status quo.
“They’ll fight tooth-and-nail on any sort of change,” said Jessica Millett, a tax partner at Hogan Lovells.
The carried interest lobby is made up of wealthy real estate, venture capital, and private equity groups, including Blackstone and the Carlyle Group. The American Investment Council, the National Venture Capital Association, and the Real Estate Roundtable have long gone to great lengths to defend their favorite loophole.
“It’s really an evergreen point of contention for these trade groups,” Jonathan Choi, a law professor at the University of Southern California, told DealBook.
It’s hard to decipher how serious Trump is about killing it. Trump has long railed against carried interest, saying a decade ago that hedge fund managers exploiting the tax code were “getting away with murder.”
Eliminating carried interest would save the government an estimated $14 billion over 10 years, according to the nonpartisan Congressional Budget Office.
Trump is on the hunt for far bigger savings if he is to pass his “big, beautiful” tax bill in coming months without blowing up the deficit. Trump wanted to kill carried interest in his 2017 tax bill, only to give up amid opposition from lobbyists and Republican lawmakers, said Victor Fleischer, a law professor at the University of California, Irvine.
But there are some in Democratic circles who believe that Trump may be more serious now than he was in 2017, DealBook hears — not least because those are the signals that they’re getting from the White House.
Trump’s disdain for carried interest is a rare fracture between him and Republican lawmakers.
And so on…
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