Hedge Fund Tax Break Targeted by Trump Administration
White House Proposes Closing Carried Interest Loophole
President Trump has signaled his intention to eliminate the carried interest tax deduction, a move that could significantly impact hedge fund managers. The deduction allows investment managers to pay a lower capital gains tax rate on income from their work as compensation.
Industry Opposition Expected
The hedge fund industry and private equity firms are expected to lobby heavily against any such move. The carried interest deduction has been a significant benefit for these firms, allowing them to avoid higher taxes on capital gains.
Support from Democrats
The elimination of the carried interest deduction has long been a priority for many Democrats. Senator Tammy Baldwin and Representatives Marie Gluesenkamp Perez and Don Beyer have introduced a bill to close the loophole.
Republican Skepticism
While some Republicans, such as President Trump, have expressed support for eliminating the carried interest deduction, others remain skeptical. Senate Majority Leader John Thune has previously played a key role in blocking efforts to close the loophole.
Impact on Private Equity Firms
Private equity companies like Apollo Global Management (APO), KKR (KKR), and Blackstone (BX) have benefited significantly from the carried interest deduction. Eliminating the deduction could reduce their profits and impact their ability to raise capital.
Previous Attempts
President Trump has previously promised to repeal the carried interest deduction, but previous efforts have not been successful. The deduction was not included in the 2017 Tax Cuts and Jobs Act.
Ongoing Developments
The White House has indicated its commitment to working with Congress to close the carried interest loophole. However, it remains to be seen whether legislation can be passed and signed into law.