May 21, 2019

Trump still wants to end the carried interest tax break

Dan Primack, author of Pro Rata

Illustration: Lazaro Gamio/Axios

President Trump still wants to end the carried interest tax break, in which certain investment managers pay capital gains rates instead of higher ordinary income rates. But don't expect it to happen anytime soon, if at all.

Driving the news: He made the comments to Fox News host Steve Hilton, who noted that then-candidate Trump had once referred to the current system as "getting away with murder." But then things get fuzzy.

  • Trump told Hilton that he used carried interest as a "negotiating chip" during 2017 tax bill negotiations to get corporate rates down to 21%, saying it otherwise would have been "23 or 24%."
  • Gary Cohn, when still Trump's top economic advisor, told Axios that Trump was asking up until the last minute "if we could still get rid of it." So if Trump was using carried interest as a negotiating chip, no one told Trump.

Between the lines: Cohn at the time blamed lobbyist-driven GOP House members from blue states for the pushback, but said nothing about a tit-for-tat on corporate rates (which the GOP caucus seemed to be in agreement on).

  • Probably because the math isn't anywhere near comparable, with even Trump telling Fox that the carried interest change wouldn't generate "that much money" in new federal revenue.

The bottom line: The House is now controlled by Democrats, who are generally more supportive of this change than are Republicans. But there's no obvious mechanism for how it would now get passed. Trump had his chance, but "negotiated" it away.

Go deeper: What taxing "carried interest" means

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