Scoop: Private equity joins Trump tax fight
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As it braces for the fight of its life, the private equity industry is launching a 7-figure ad campaign to make its case for how it boosts the economy.
Why it matters: President Trump is taking aim at the tax treatment of "carried interest," and the private equity industry has the resources and self-interest to preserve the status quo.
- Tax writers have long eyed how private equity structures some of its compensation, which allows employees to pay capital gains rates on their "carried interest" instead of the higher income tax rate.
- It currently gets taxed as capital gains at 23.8% and not at the top regular income rate of 40.8%.
- The ad and education campaign, "Investing in America," is designed to appeal to Trump's broader desire to make America more competitive and grow its industrial base.
What they're saying: "President Trump's tax law struck the right balance in 2017," said Drew Maloney, the president and CEO of the American Investment Council.
- "A new 40.8% tax rate would be higher than China, Europe and Canada and would make the U.S. less competitive," he said.
Between the lines: Trump fixed the "carried interest" issue in 2017, when he required private equity workers to hold assets for three years before receiving the capital gains rate, the industry argues.
- Changing it could reduce the deficit by some $13 billion over 10 years, according to the Congressional Budget Office.
Zoom in: The AIC is highlighting just how many jobs it helps support in a new economic impact study from EY.
- The study reports that the U.S. private equity sector employed 13.3 million workers across the country and paid $337 billion in federal, state and local taxes from its firms and employees and the companies it invests in.
Zoom out: Corporate America is also worried about Trump looking for more revenue by preventing corporations from deducting their state and local taxes (SALT) from their federal returns.
- The so-called C-SALT is causing heartburn in C-suites, even if it has not gotten as much attention as individual SALT.
