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The tax break for carried interest, which favors hedge fund managers and private equity executives, was targeted by Democrats in the Inflation Reduction Act but was removed after Senator Kyrsten Sinema (D-AZ) demanded it be erased before she would support the bill.
The so-called “carried interest loophole” is a wrinkle in the tax law that allows financial executives compensated out of profits to pay a lower tax rate than their salaried counterparts.
Under current law, those profits are taxed at a 20-percent capital gains rate instead of the 37-percent bracket highly-paid salaried workers earn.
In most hedge funds, as much as 20 percent of profits are distributed among top executives, the NYT noted.
Had the measure remained in the law, it would have raised $14 billion in new tax revenue over 10 years, supporters said.
Since 2016, Sinema has received $2.2 million in campaign donations from financial executives who usually favor Republicans in their political giving, according to the nonprofit OpenSecrets, which monitors money in politics.
In place of the bill’s provision closing the carried interest loophole, Democrats inserted a 1-percent tax on corporate stock buybacks, which, supporters say, will raise more revenue than closing the carried interest loophole would have.
Closing the carried interest loophole was a campaign talking point for both Donald Trump in 2016 and Joe Biden in 2020.
The Republicans’ 2017 tax cut bill left carried interest alone. Biden included its elimination in his original Build Back Better proposal but that provision was negotiated away, along with many of the proposal’s other aspects.
For years, the hedge fund and private equity industries have lobbied to keep their carried interest privilege and touted its removal from the new law.
“The private equity industry directly employs more than 11 million Americans, fuels thousands of small businesses, and delivers the strongest returns for pensions,” Drew Maloney, CEO of the American Investment Council, said in a statement.
“We encourage Congress to support private capital investment,” he added.
“We’re happy to see that there’s bipartisan recognition of the role that private capital plays in growing businesses and the economy,” CEO Bryan Corbett of the Managed Funds Association said in a comment quoted by The New York Times.
“This is a loophole that absolutely should be closed,” Jared Bernstein, a member of the President’s Council of Economic Advisors, said in a September CNBC interview.
However, “when you start negotiating on taxes, there are more lobbyists on taxes than there are members of Congress,” he said.
TRENDPOST: An April study by Princeton and Northwestern universities analyzed the fate of 1,779 policy proposals in Congress.
The conclusion: “Economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy,” while average citizens “have little or no independent influence.”
Rule by economic elites is the definition of an oligarchy or, perhaps even more accurate, a plutocracy—rule by a wealthy elite minority.
The moneyed elites rule through their hired politicians, who keep talking about “freedom” to distract us from the fact that we have less and less.
Also, see the report in this Trends Journal, “SENATE PASSES BILL TO ENRICH THE RICH AND SCREW THE PEOPLE”.