Both Presidents Donald Trump and Barack Obama sought to scrap carried interest but failed to do so. What’s on the table now doesn’t get rid of it either; the changes that Democrats are pursuing only make it harder for rich investors to get the preferential tax rate on swaths of their income.
“This doesn’t completely close the loophole,” Kimberly Clausing, a former Treasury Department tax official for the Biden administration, told Insider. “It only partially does by lengthening the amount of time that you have to hold the investment for it to qualify as a capital gain.”
Closing the carried interest loophole would only affect a slice of the financial sector. But it’s a tax that hits a powerful group of rich Americans who have managed to escape tax increases so far under the Biden administration.
The American Investment Council, a lobbying group that represents private equity firms like Blackstone, immediately pummeled the carried interest initiative as a burden on small businesses benefiting from their investments.
“This is like a small universe of a few hedge funds that maybe hold long-term investments, a lot of private equity or venture capital firms,” Ben Koltun, the research director at Beacon Policy Advisors, said in an interview. “It’s a very select few people, but also a very powerful few people as well.”