Congressional leaders and the Trump administration are considering retaining the carried-interest tax break for some, according to Senate Majority Leader Mitch McConnell, R-Ky., and Treasury Secretary Steven Mnuchin. Both McConnell and Mnuchin spoke together at a Greater Louisville Inc. Chamber of Commerce event on August 21 in Kentucky.
“We will close the loophole for hedge funds in carried interest,” Mnuchin said, adding that there are also many other types of funds that create jobs and the administration does not want to discourage investment. Generally, the carried interest tax break enables certain investment fund managers to effectively pay a preferential 20-percent, long-term capital gains rate on income received as compensation, rather than the ordinary income tax rates of up to 39.6 percent.
McConnell also confirmed at the event that carried interest would be on the table during tax reform discussions between congressional leaders and the White House. He noted the importance of looking at all tax preferences while working on tax reform.
President Trump’s campaign materials stated he would end the current tax treatment of carried interest. Trump’s recent one-page tax reform outline did not mention carried interest explicitly but stated it would eliminate “targeted tax breaks that mainly benefit the wealthiest taxpayers” (TAXDAY, 2017/04/27, W.1).
Meanwhile Senate Minority Leader Charles E. Schumer, D-N.Y., released an August 21 statement noting that Democrats would be happy to work with Republicans on tax reform if they can agree with Democrats on two specific principles. “We believe strongly that not one penny go to the top 1 percent and that any tax reform must be deficit neutral,” Schumer said.
By Jessica Jeane, Wolters Kluwer News Staff