Trump Wants To Nix This Wall Street Tax Break

Pour one out for the private equity analysts that are going to have to deal with their frantic MD. President Trump indicated this week that he wants to end the so-called carried interest tax loophole, a controversial tax provision that’s helped fund managers accumulate massive wealth for over a decade.

At issue: Investors—mainly those focused on private equity, but also hedge funds and venture capitalists—get a cut of the profit from their funds, known as carried interest. For many firm partners, that makes up a large portion of their compensation, and conveniently for them, it's taxed as capital gains (at a ~20% rate) rather than as income (taxed at 37% federally for those in the top bracket).

• Democrats and Republicans alike have criticized this structure, saying it takes away billions of dollars in tax revenue from the government and is unfair to other workers.
• But dealmakers argue that the tax setup is appropriate because they take on risk by investing their own money in deals without a guaranteed return.

It’s not a new idea. Trump tried to close the loophole during his first presidency, and both Obama and Biden initiated similar efforts to no avail. It’s unclear if it will work this time around, but it could help Trump fill a budget hole as he plans to extend other tax cuts.—CC