A group of U.S. Senators led by U.S. Sen. Tammy Baldwin (D-WI) introduced legislation that would close the carried interest tax loophole, which benefits money managers.
Specifically, the loophole allows investment managers to pay the lower 20 percent long-term capital gains tax rate on income received as compensation, rather than the regular 37 percent tax rate that they would pay for the same amount of wage income.
The bill, the Carried Interest Fairness Act, would require carried interest income to be taxed at ordinary rates. According to the Joint Committee on Taxation, closing this loophole will raise $15 billion in revenue over 10 years.
“Our legislation will bring fairness to a rigged tax system that favors wealthy Wall Street hedge fund managers and allows them to pay a lower tax rate than many Wisconsin workers. It’s simply unfair for our workers to pay a higher tax rate than a millionaire or billionaire on Wall Street,” Baldwin said. “Trump broke his promise to close this loophole and actually signed a Republican tax bill that kept it in place. President Biden has called on Congress to close the carried interest tax loophole, and this legislation will do it.”
It is cosponsored by Sens. Joe Manchin (D-WV), Sherrod Brown (D-OH), Cory Booker (D-NJ), Dianne Feinstein (D-CA), Mazie Hirono (D-HI), Tim Kaine (D-VA), Amy Klobuchar (D-MN), Ed Markey (D-MA), Jack Reed (D-RI), Bernie Sanders (I-VT), Chris Van Hollen (D-MD), Elizabeth Warren (D-MA), and Sheldon Whitehouse (D-RI).
“The carried interest loophole is yet another example of Wall Street executives’ exploiting our tax code to pad their pockets rather than invest in workers and Main Street,” Brown said. “Corporate greed is fundamental to the Wall Street business model — and workers aren’t going to get their fair share until we change it. It’s past time for Congress to put workers first.”
President Joe Biden calls on Congress to close the carried interest loophole in his American Families Plan.
“Permanently eliminating carried interest is an important structural change that is necessary to ensure that we have a tax code that treats all workers fairly,” the White House said in a fact sheet on the plan.
The legislation is supported by AFL-CIO, The Agenda Project, American Family Voices, American Federation of Government Employees, American Federation of State County and Municipal Employees, American Federation of Teachers, American Postal Workers Union, Americans for Financial Reform, Catholics in Alliance for the Common Good, Center for Popular Democracy Action, and Communications Workers of America, among others.
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