Trump Targets Hedge Fund Tax Break in New Tax Proposal
During a meeting with Republican lawmakers, President Trump proposed eliminating the carried interest tax deduction, a popular tax break utilized by hedge fund managers. Press Secretary Karoline Leavitt outlined the administration's tax priorities, including "closing the carried interest tax deduction loophole."
Trump's proposal aligns with a long-standing priority of Democrats, as evidenced by a recent bill introduced by Senator Tammy Baldwin and Representatives Marie Gluesenkamp Perez and Don Beyer.
The carried interest deduction allows investment managers to pay a lower tax rate on income received as compensation, typically a capital gains tax rate of 23.8% compared to potentially double that for regular wage income.
However, the move is likely to face resistance from the hedge fund industry and private equity firms that have benefited from the deduction. Industry advocates, such as Drew Maloney of the American Investment Council, argue that the 2017 tax law's adjustments to carried interest "struck the right balance."
Trump's previous attempts to eliminate the deduction failed to materialize. Democrats attempted to address the issue in 2022 but faced opposition from then-Senator Kyrsten Sinema.
Senate Majority Leader John Thune has also played a prominent role in opposing the closure of the loophole.
The proposal also includes measures to end a tax break for sports team owners and "adjust" the state and local tax deduction (SALT).