- President Donald Trump suggested during his campaign that he would close a tax loophole for hedge fund managers.
- But the Republicans’ tax bill keeps that loophole, called the carried interest provision, which allows fund managers to pay a lower tax rate on investment profits.
President Donald Trump said during his campaign that he would close a tax loophole for fund managers.
“The hedge fund guys didn’t build this country,” he told John Dickerson on CBS’s “Face the Nation” in August 2015. “These are guys that shift paper around and they get lucky.”
“Half of them, look, they’re energetic, they’re very smart, but a lot of them, it’s like they’re paper pushers. They make a fortune, they pay no tax. It’s ridiculous, OK?”
But that loophole – the carried interest provision – remains in the Republicans’ final version of the tax bill, which the House and Senate are scheduled to vote on Tuesday.
With the carried interest provision, investment fund managers can pay a lower capital gains tax rate on their share of their fund’s profit. Usually it’s around 20%, below the current top income tax rate of 39.6%.
The only slight change to the carried interest provision from the current law is that the assets will have to be held for three years, rather than one year. But that may not matter much, as some fund managers hold assets for more than three years.
There have been concerns over the years whether the loophole benefits the wealthiest in the country. The issue resonated with Trump supporters during the campaign season.
When asked about how the provision benefits the American people by MSNBC’s Willie Geist on Tuesday, House Ways and Means Chair Kevin Brady (R-Texas) argued that most don’t care about the provision.
“Look, carried interest, we can talk about that for the next hour if you’d like, but for most Americans they could care less about that. They care about their paychecks and getting the economy going,” he told Geist.
“That average family making $73,000 a year – both blue collar workers – will see a tax cut of $2,059 in this tax bill. And for the first time, we’re actually going to be competitive – first time in 31 years – worldwide,” he added. “That’s what Americans are really focused on.”