WASHINGTON (Reuters) - As a candidate, U.S. President Donald Trump promised to close the “carried interest” tax break that benefits some of Wall Street’s wealthiest financiers - but the Republican tax bill released on Thursday makes no mention of it.
Carried interest is a share of an investment fund’s profits - typically about 20 percent beyond the return guaranteed to investors - that is paid out to the general partners of private equity, venture capital, real estate and hedge funds.
Under current law, carried interest income is taxed at the capital gains rate of 20 percent. That is well below the 39.6 percent rate that high earners pay on ordinary wages and salary.
Trump pledged during his populist presidential campaign to close the carried-interest loophole, saying hedge fund managers were “paper pushers” who were “getting away with murder.”
Carried interest represents a large portion of many fund managers’ incomes. For years they have employed Washington lobbyists to help defend the lucrative tax break.
Treasury Secretary Steven Mnuchin said in August that the Trump administration still planned to close the loophole for hedge funds, but there might be an exemption to allow financial firms that “create jobs” to continue taking advantage of the tax break.
The 429-page tax bill released by Republicans in the House of Representatives on Thursday has no language changing how financial firms can take advantage of the lower carried-interest rate.
“The introduced text does not modify current policy related to carried interest,” a spokesman for the tax-writing House Ways and Means Committee said.
The bill is expected to undergo revisions before it is brought up for a vote in the House. Trump has said he would like to see the House and the Senate pass tax legislation before the U.S. Thanksgiving holiday on Nov. 23.
“We fully expected months ago that the one thing that they would do to close loopholes would be the one thing that Trump talked about during the campaign,” said Seth Hanlon, a senior fellow at the liberal Center for American Progress and a former economic adviser to Democratic President Barack Obama.
Obama targeted the carried interest loophole but never closed it. Government estimates show it will cost the federal budget at least $20 billion over the next decade.
Reporting by Amanda Becker; Editing by Leslie Adler