A group of Democratic lawmakers on Tuesday unveiled a bill that aims to end the so-called carried-interest loophole that allows certain financial firms to enjoy a reduced tax rate on income.
“The carried-interest loophole has allowed private-equity tycoons to pay lower tax rates than their secretaries,” said Democratic Rep. Bill Pascrell of New Jersey in a statement on Tuesday. “This loophole has survived too long and we are going to push hard to see that it is finally closed.”
The loophole has been a hot issue for years, with its supporters arguing that ending or limiting it would discourage investment and reduce economic activity.
From the archives (September 2017): Mnuchin says hedge funds will lose carried-interest loophole in tax overhaul
Pascrell’s office said the loophole’s biggest beneficiaries are private-equity partners who use it to avoid paying income taxes on compensation earned from managing other people’s money, adding that the current state of affairs allows Wall Street firms to pay the lower capital-gains rate on income (15% or 20%), rather than paying ordinary income rates (up to 37%).
Pascrell, chairman of the House Ways and Means Committee’s oversight subpanel, rolled out the new bill — called the Carried Interest Fairness Act — along with Democratic Rep. Andy Levin of Michigan and Democratic Rep. Katie Porter of California.