Democrat Tax Hike Proposal Leaves Private Equity's Carried Interest Loophole In Place

Democrat Tax Hike Proposal Leaves Private Equity's Carried Interest Loophole In Place


When U.S. House Ways and Means Committee Chairman Richard Neal on Monday proposed a major set of tax hikes to fund Democratic President Joe Biden’s social spending plans, one tax break popular among major Democratic Party donors was left in place—the taxation of carried interest income at the lower capital gains rate.

President Joe Biden’s American Families Plan originally included an end to what critics describe as the carried interest “loophole,” a wrinkle in the tax code that allows managers of hedge funds and private equity funds to treat some income generated from their investment activity as capital gains, which are taxed at a much lower rate than ordinary income. Biden’s proposal would have treated such gains as ordinary income—raising the rate from 20 percent today to 39.6 percent—for any taxpayer earning $1 million or more.

But following months of ferocious lobbying by the private equity industry, the

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