Washington, DC – The Take on Wall Street campaign denounced the proposed tax bills for effectively preserving the carried interest loophole for Wall Street money managers, a loophole Trump promised to close during the campaign trail.
This loophole allows wealthy private equity and other Wall Street moguls to be taxed at a lower rate than nurses and firefighters by letting these managers claim part of what is really salary income as capital gains, which is taxed at a significantly lower rate. Blackstone CEO Stephen Schwarzman alone is estimated to have saved close to $100 million a year as a result of this loophole.
The House bill makes a pretense of closing the loophole by requiring fund managers to hold onto the carried interest for two additional years before receiving the preferential capital gains rate. But this change would hardly affect private equity firms, the main beneficiaries of this loophole, as they already hold assets for at least that long. The provision would raise about $1.2 billion over a decade, compared to the $19 billion that full closure of the loophole would be set to generate according to the Joint Committee on Taxation.
“While Trump campaigned as a populist, he governs for the elite and well-off. Take his repeated promise on the campaign trail to close the carried interest loophole that lets hedge fund managers pay a lower tax on their earnings. During the campaign, Trump said, ‘The hedge fund guys are getting away with murder.’ It’s unconscionable that his tax bill not only maintains this carried interest loophole but also allows some of the wealthiest Americans to avoid paying their fair share by using a pass-through loophole to give them a lower tax rate than a school teacher.” Randi Weingarten, President, American Federation of Teachers
“Both parties said they wanted to close the carried interest loophole during the campaign season because it is so obviously an unfair giveaway to a tiny number of the richest people in the country. It is outrageous that the House and Senate bills preserve it,” said Lisa Donner, Executive Director, Americans for Financial Reform. “Our tax code should work for people and communities, not incentivize Wall Street manipulation.”
“The claims by House Republicans that they are closing the obscene carried interest loophole, which allows millionaires and billionaires in many cases to pay a lower income tax than CWA members, is just not true. It’s just another provision of this major tax scam that’s crafted to try and hide the fact that this bill is huge handout to corporations, millionaires and billionaires paid for by working families. The reality is that some of Wall Street’s highest rollers and tax evaders will continue to game the system to their benefit through a tax code crafted in their favor. If Congressional Republicans were truly serious about tax fairness and closing the carried interest loophole, they would have included the language of H.R. 399 in their legislation.” Shane Larson, Legislative Director, Communications Workers of America
“President Trump campaigned on a promise to close the egregious carried interest loophole. Both the Senate and the House bill – even with Chairman Brady’s hollow amendment – fails to address the fundamental issue that fund managers mischaracterize their pay as capital gains. Washington’s worst kept secret is that money buys votes. These fund managers have sent in their campaign donations and have sent their minions into offices on Capitol Hill and are seeing the reward: the preservation of their special loophole. The American people should be outraged that Congress, both chambers, and that the Trump Administration has chosen to protect the interests of a small group of incredibly wealthy fund managers over the basic principle of fairness in our tax code” said Chair of the Patriotic Millionaires Morris Pearl, former managing director at BlackRock.
“Carried interest is the mumbo jumbo term for the unsupportable tax break that hedge fund and private equity titans get when they should be paying the same as their high income peers. Even candidate Trump pledged to end this scam. But since some of that break is tithed back to lawmakers in political contributions, GOP tax writers are quashing good public policy.” Bartlett Naylor, Financial Policy Advocate at Congress Watch, a division of Public Citizen
“Trump led last year’s GOP campaigns with a cry that “the hedge fund guys are getting away with murder,” promising he’d be a champion for the working class. Now he and Republicans in Congress are pushing a multi-trillion dollar transfer of wealth from working people to the ultra rich. Their plan leaves the carried interest loophole wide open, and adds a new “pass through” loophole that will add billions to hedge fund & private equity profits. It’s a broken promise to regular people and a big victory for the billionaire swamp monsters of Washington and Wall Street.” Charles Khan, Organizing Director, Strong Economy For All Coalition & the Hedge Clippers Campaign
“The increased political spending by the private equity industry is clearly paying off,” said Luísa Galvão, Take on Wall Street campaign coordinator. “Instead of talking out of both sides of their mouths while rewarding Wall Street and private funds for their predatory behavior, Congress should be working to make Wall Street pay its fair share.”
The Take on Wall Street campaign — a coalition of over 50 community groups, unions, consumer advocates and others — is urging Congress to oppose tax cuts for Wall Street and the 1%, and adopt a set of tax reform measures that would raise more than $1 trillion in additional revenue and discourage dangerous Wall Street speculation.