Apr 26, 2017

Trump plan would lower taxes on some hedge fund managers

AP Photo/Alex Brandon

President Trump campaigned on a pledge to increase taxes on hedge fund and private equity fund managers, by closing the carried interest loophole. But there is no mention of carried interest in the tax plan released today by the White House. Instead, there is a plan to lower the tax rate on so-called "pass through" entities, which actually would reduce the tax burden on many of those same professional investors.

What are pass-through entities? Businesses that pay taxes at individual rates (up to nearly 40%), rather than at corporate rates (35%).

New plan: The White House wants pass-through entities to be taxed at corporate rates, which it hopes to slash down to 15%.

Result: Trump's argument is that many small businesses currently are taxed as pass-through entities, but that treatment also applies to a lot of hedge funds and real estate funds that are structured as things like limited liability companies. Moreover, funds structured as limited partnerships (almost all private equity and venture capital) likely would either restructure or figure out a way to qualify as pass-through entities for tax purposes. In short, such fund managers would now pay a flat 15% tax on all of their income, including annual management fees on which they currently pay individual rates.

This would effectively eliminate the question over changing the tax treatment of carried interest, since 15% is lower than either the current capital gains rate or the ordinary income rate.

Possible caveat: Treasury Secretary Mnuchin said the following during a White House press briefing: "We will make sure that there are rules in place so that wealthy people can't create pass-throughs and use that as a mechanism to avoid paying the tax rate they should be on the personal side." He did not provide any additional specifics.

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Coronavirus dashboard

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  1. Global: Total confirmed cases as of 4 p.m. ET: 5,463,392 — Total deaths: 344,503 — Total recoveries — 2,195,325Map.
  2. U.S.: Total confirmed cases as of 4 p.m. ET: 1,653,904 — Total deaths: 97,948 — Total recoveries: 366,736 — Total tested: 14,163,915Map.
  3. World: Italy reports lowest number of new cases since February — Ireland reports no new coronavirus deaths on Monday for the first time since March 21 — WHO suspends trial of hydroxychloroquine over safety concerns.
  4. 2020: Trump threatens to move Republican convention from North Carolina — Joe Biden makes first public appearance in two months.
  5. Public health: Officials are urging Americans to wear masks over Memorial Day.
  6. Economy: New York stock exchange to reopen its floor on Tuesday — White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election — Charities refocus their efforts to fill gaps left by government.
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Updated 2 hours ago - Politics & Policy

Italy reports lowest number of new coronavirus cases since February

Italy’s aerobatic team Frecce Tricolori fly over Milan in Duomo Square on May 25. Photo: Francesco Prandoni/Getty Images

The Italian government reported 300 new cases of coronavirus on Monday, the lowest daily increase since Feb. 29.

Why it matters: Italy, the first country in Europe to implement a nationwide lockdown after emerging as a hotspot in March, appears to have finally weathered its coronavirus outbreak. Italy has reported nearly 33,000 total deaths, the third-highest total behind the U.S. and U.K.

Joe Biden makes first public appearance in over two months

Photo: Oliver Douliery/AFP via Getty Images

Former Vice President Joe Biden made his first in-person appearance in over two months on Monday to honor Memorial Day by laying a wreath at a Delaware veterans park, AP reports.

Why it matters: Biden, the Democratic Party's presumptive nominee, has taken the unprecedented step of campaigning from his home during the coronavirus pandemic, ever since canceling a rally in Cleveland on March 10.