'A tax loophole that benefits billionaire investors remains largely untouched in both the House and Senate Republicans’ tax reform bills, despite President Donald Trump’s repeated promises to do away with it.
Leaving the provision unchanged effectively means that a home builder or other local business person would pay a higher tax rate on their income than a Wall Street hedge fund manager would pay even on a larger income.
The loophole is known as the carried interest, a feature of the U.S. tax code that allows hedge funders, real estate investors, venture capitalists, and private equity managers to pay taxes at the long-term capital gains rate instead of the rate imposed on the highest bracket of income earners.
Carried interest is the share of total profits from clients’ investments that hedge fund, private equity and a number of other investment managers collect. These firms earn income by collecting a percentage of their client’s profits (most commonly a 20 percent fee on profits). The profits these managers bring in are taxed at the 20 percent capital gains rate (plus a 3.8 percent Obamacare surtax), as opposed to the top rate on ordinary income of 39.6 percent.
The president highlighted the carried interest provision on the campaign trail as something his administration would close because it was letting rich hedge fund managers “get away with murder.”'
Read more: The Billionaire’s Loophole In The GOP Tax Reform Bill
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