WASHINGTON, DC – Senator Tammy Baldwin (D-WI) and House Ways and Means Committee Ranking Member Sander Levin (D-MI) today joined Patriotic Millionaires – a group of more than 200 wealthy Americans dedicated to addressing our nation’s economic inequality – in calling on Congress to close the carried interest loophole and strengthen the economy.
In June, Sen. Baldwin and Rep. Levin introduced the Carried Interest Fairness Act, legislation that would close the carried interest loophole and ensure that fund managers – including those in private equity – pay the same tax rates as the vast majority of Americans.
“Instead of simply rewarding the wealthy with tax preferences, Washington needs to do more to respect hard work, invest in economic growth, and give the middle class a fair shot at getting ahead,” said Senator Baldwin. “At a time when too many Wall Street millionaires pay a lower effective tax rate than some truck drivers, teachers and nurses, we need to eliminate this loophole and make sure those at the top are paying their fair share.”
“Legislation to close the carried interest loophole has passed in the House four times beginning in 2007. This loophole gives a $15 billion tax break to wealthy Americans, while doing nothing to help the typical family and typical worker,” said Rep. Levin. “We must do more to ensure fairness in the tax code, and we can start by making sure that people who invest other people’s money are paying at an ordinary income tax rate like our school teachers and restaurant workers. The legislation that Senator Baldwin and I introduced would do just that. We will continue to build on the growing bipartisan support for this long overdue action, as part of the effort to ensure a fairer tax system.”
“I used to be in the money management business and the only reason why hedge fund managers have a lower tax rate than people who actually work for a living is that the hedge fund managers are more active at lobbying,” said Morris Pearl, Chair of the Patriotic Millionaires. “There has been growing bipartisan consensus to close the carried interest loophole and given this rare level of agreement, we would like to see a vote to close this egregious loophole so the American public can know whose side their representatives are on.”
The carried interest loophole allows certain investment fund managers to take advantage of the preferential 20 percent tax long-term capital gains rate on income received as compensation, rather than the ordinary income tax rates of up to 39.6 percent that all other Americans pay. The Joint Committee on Taxation recently estimated that closing the carried interest loophole through the Carried Interest Fairness Act would raise more than $15 billion in revenue.
There has been broad support from government officials, economists, investors, and editorial boards for closing the carried interest loophole. Read some of those statements here.