President Donald Trump has outlined his tax priorities to Republican lawmakers. Among them was a surprise: the so-called carried interest “loophole.”
That could mean Wall Street will have to brace for a big fight to keep one of its most cherished tax breaks.
Carried interest was one of several items Trump mentioned last week, according to Karoline Leavitt, the White House press secretary. He reiterated ideas he promoted on the campaign trail, including ending taxes on tips, overtime and Social Security payouts, as well as expanding deductions for state and local taxes.
But his call to end the carried interest exemption — and tax breaks for “billionaire sports-team owners” (many of whom supported Trump) — wasn’t on many observers’ bingo cards.
A reminder: Carried interest is the cut that hedge fund, private equity and venture capital investors take from their funds’ profits, which is taxed as capital gains and therefore at a far lower rate than regular income.
Carried interest has long been criticized as a giveaway to wealthy financiers. Opponents of the exemption include Republican and Democratic lawmakers and prominent business leaders including Warren Buffett and JPMorgan Chase CEO Jamie Dimon. Getting rid of it, they say, could raise billions for the government.
Presidents have tried to kill it before, including Barack Obama, Joe Biden — and yes, Trump, who once called the tax break “good for Wall Street investors and for people like me but unfair to American workers.”
But the carried interest break has survived again and again, thanks to powerful defenders in Washington. Members of both parties in Congress, including then-Democratic Sen. Kyrsten Sinema in 2021, have opposed efforts to kill the carried interest exemption.
Heavy lobbying by industry groups undoubtedly helped keep it alive as well. Financiers’ allies are readying their defenses.
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