President Trump sat down with Republican lawmakers Thursday to discuss tax cuts and made a favorite deduction of hedge fund managers one of his targets, White House press secretary Karoline Leavitt said Thursday.
Leavitt listed “the tax priorities of the Trump administration” Thursday while reading from a prepared list. She had listed many familiar ideas, such as ending taxes on tips, but also included a promise to “close the carried interest tax deduction loophole.”
“The president is committed to working with Congress to get this done,” she added.
It’s an idea that, if Trump follows through and pushes it, could endear him to many Democrats but will surely be a subject of skepticism from some of his GOP colleagues.
Any move would also surely be the subject of intense lobbying from the hedge fund industry and private equity firms that have long taken advantage of the deduction.
The carried interest deduction allows investment managers to pay a lower capital gains tax rate on the income they receive from their work as compensation. It’s no small matter, with many capital gains subject to 23.8% taxes while the rate for regular wage income can be double that.
Private equity companies like Apollo Global Management (APO), KKR (KKR), and Blackstone (BX) dropped on the remarks (Apollo Global Management is the parent company of Yahoo Finance).
It’s an idea that Trump has promised before only to see the effort not come to fruition. “Promise Broken,” reads the Politifact tracker of Trump’s previous first-term promise on the issue.
Trump pushed for repeal on the 2016 campaign trail but then downplayed the issue once in office and a repeal wasn’t included in the 2017 Tax Cuts and Jobs Act.
American Investment Council president Drew Maloney, who advocates for the private equity industry in Washington, said in a statement that the 2017 law’s smaller adjustments to carried interest “struck the right balance.” He added a push to President Trump and lawmakers “to keep this sound tax policy in place and unleash more long-term investment.”
Leavitt also said Thursday in her brief remarks that the president wants to end a tax break that allows sports team owners to use that asset to pay lower income tax rates as well as “adjust” the closely watched state and local tax (SALT) deduction.
Eliminating the carried interest deduction has been a longtime priority of many on the left — a new bill from Democratic Senator Tammy Baldwin and Reps. Marie Gluesenkamp Perez and Don Beyer on the subject was also revealed Thursday.
