
Republicans weigh ending Wall Street's favorite tax break
Republicans are considering doing away with one of Wall Street's favorite tax breaks at the encouragement of President Trump, one that has long enjoyed Republican support and that could put up yet another obstacle on the road to a tax bill.
The tax break on carried interest — often called the carried interest loophole — allows the managers of investment funds such as private equity firms and hedge funds to count their income as capital gains and thereby have it be subject to a lower tax rate.
The tax rule, which has been debated by lawmakers for more than a decade and has come within a hair's breadth of getting canceled in previous legislative fights, would affect compensation levels at some of Wall Street's most powerful firms.
Republicans say that canceling the tax break would improve the public perception of their tax law, which includes many tax breaks for business owners and other taxpayers at the top end of the income spectrum.
'[Trump] thinks it's a little unfair that one sector of industry gains a lot by using [carried interest] as part of their income and paying lower capital gains. President Trump doesn't want to see anything perceived as unfair. Certainly for the wealthy, he wants to make sure that all of America gets the benefit of this tax bill. And I agree with him,' Rep. Dan Meuser (R-Pa.) told The Hill.
Rep. Rick Allen (R-Ga.) said that nixing carried interest would help to break the image of Republicans as advancing the interests of America's richest taxpayers.
'We get accused of just looking after the wealthy — and this would include the wealthy,' he said. 'With the momentum in the country, I don't think folks will mind paying a little more to make sure we get this done.'
Carried interest is controversial because it allows the income of a hedge fund or a private equity firm, which usually pass their tax bills on directly to their owners, to be treated as a capital gain. Capital gains at the upper end of the income spectrum have lower tax rates than ordinary wage and salary income.
While fees charged by these firms are taxed as regular income up to a top marginal rate of 37 percent, the tax rate on the interest they get paid comes at a top rate of 20 percent plus a net investment income tax of 3.8 percent — substantially lower.
Private equity companies are dead set against canceling the tax break.
'We encourage the Trump administration and Congress to keep this sound tax policy in place and unleash more long-term investment,' the American Investment Council, a trade group for the private equity industry, said in a statement.
The Congressional Budget Office (CBO) estimated last year that taxing carried interest payments as ordinary income would decrease the deficit by just $13 billion over the subsequent decade — a drop in the bucket of the $36 trillion national debt and little more than a feather on the scale of the $4.7 trillion burden of extending the 2017 Trump tax cuts.
However, ending the tax break could make extending the Trump tax cuts seem more egalitarian, Republicans said. According to one distributional analysis of the extensions by the Institute on Taxation and Economic Policy (ITEP), the richest 1 percent would receive an average tax cut of around $36,300 while nearly all other income segments would actually see a tax increase.
'The hike on the middle 20 percent [would be] about $1,500 and the increase on the lowest-income 20 percent of Americans [would be] about $800,' ITEP policy director Steve Wamhoff and his co-authors found.
Amid such a skew, Republicans are seeing the appeal of targeting a Wall Street-focused tax break, though they say the discussion is still in early stages.
'We really haven't socialized it that much,' Meuser said. 'I just know what the president said, and after assessing the situation, I see his point, and I agree with him.'
Sen. John Kennedy (R-La.) said he was thinking it over.
'I haven't made a decision about carried interest,' he told reporters Monday. 'I know the way it works. Frankly, there are good arguments on both sides. If we end up [needing] the money, could I vote to get rid of carried interest? Yeah, I could.'
Asked about the tax break, House Ways and Means Committee Chairman Rep. Jason Smith (R-Mo.) told The Hill that the entire U.S. tax code was being reconsidered.
'As the tax teams have been working over the last year in 120 different meetings, we're looking at the entire tax code. Every provision is on the table,' Smith told The Hill Tuesday.
Former President Biden floated taxing carried interest as regular income in various legislative proposals, including the 2022 Inflation Reduction Act (IRA) and his fiscal year 2024 budget.
Democrats had to remove the carried interest change from the IRA to shore up their party-line vote and get the support of then-Sen. Kyrsten Sinema (Ariz.), a wild card for Democrats during the previous Congress.
'I believe strongly in [closing] the carried interest loophole. I have voted for it. I pushed for it, I pushed for it to be in this bill. Sen. Sinema said she would not vote for the bill, not even move to proceed, unless we took it out. So we have no choice,' Sen. Chuck Schumer (D-N.Y.), then the Senate majority leader, said in 2022.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
21 minutes ago
- Yahoo
UnitedHealth Seeks $1B Latin America Exit: Sources
UnitedHealth Group Incorporated (NYSE:UNH) is one of the best Dow stocks to invest in. The company is considering several offers for its Latin American business, according to two insiders familiar with the situation, as it works to recover from a series of major setbacks, including the removal of its CEO and a reported criminal accounting investigation. The largest US health insurer has aimed to exit Latin America since 2022, but selling its Banmedica unit has become more urgent recently due to multiple challenges, one source said. A senior healthcare professional giving advice to a patient in a clinic. New CEO Steve Hemsley told shareholders last week that he is focused on regaining their confidence following a disappointing earnings report and a Wall Street Journal story about a criminal probe into alleged Medicare fraud. UnitedHealth Group Incorporated (NYSE:UNH) maintains it has not been notified by the Department of Justice and stands by its business integrity. UnitedHealth Group Incorporated (NYSE:UNH) has received four non-binding bids for Banmedica, which operates in Colombia and Chile, totaling around $1 billion, according to sources who requested anonymity due to the confidential nature of the negotiations. While we acknowledge the potential of UNH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None. Sign in to access your portfolio
Yahoo
22 minutes ago
- Yahoo
Disney to Pay Comcast $438.7M for Full Hulu Ownership, Ending Valuation Dispute
The Walt Disney Company (NYSE:DIS) is one of the best Dow stocks to invest in. The company has agreed to pay Comcast $438.7 million to buy out its remaining stake in the streaming service Hulu, ending a lengthy appraisal process. In 2023, The Walt Disney Company (NYSE:DIS) announced its plan to acquire Comcast's 33% share of Hulu, paying $8.6 billion based on a minimum value of $27.5 billion that the companies had agreed on in 2019. This move wasn't unexpected, as reports had indicated Disney's intention to gain full control of Hulu. The Walt Disney Company (NYSE:DIS) had originally acquired a two-thirds stake in Hulu through its purchase of Fox Corp.'s entertainment assets. After the initial payment, Disney and Comcast entered an appraisal process initially set to finish in 2024. The deal is expected to be finalized by July 24. Disney CEO Bob Iger made the following statement: 'We are pleased this is finally resolved. We have had a productive partnership with NBCUniversal, and we wish them the best of luck.' Meanwhile, The Walt Disney Company (NYSE:DIS) has started merging Hulu with its other streaming services, which are also bundled with ESPN+, its sports streaming platform. While we acknowledge the potential of DIS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None.


CBS News
22 minutes ago
- CBS News
Mayor Bass, regional mayors call for end to ICE raids in Southern California: "Our communities are not battlegrounds"
After days of violent and destructive protests in Los Angeles, fueled by an increase in immigration enforcement operations, Mayor Karen Bass and other regional mayors called for an end to Immigration and Customs Enforcement raids. At a news conference Wednesday morning, Bass said the unrest in a portion of Los Angeles started last Friday after immigration operations were carried out in several parts of Southern California. Bass told reporters that LA and surrounding cities were "peaceful" before the raids. Mayor Karen Bass called on the Trump administration to end the immigration enforcement operations taking place across the Southern California region. KCAL News She explained that the raids have caused fear in immigrant communities, and accused President Trump of worsening the situation when he ordered the deployment of National Guard and U.S. Marine troops. She called for an end to ICE raids and the federalization of troops. "When you start deploying federalized troops on the heels of these raids, it is a drastic and chaotic escalation and completely unnecessary," Bass said. Mr. Trump posted on his Truth Social platform, claiming that his decision to deploy troops to LA saved the city from burning to the ground. "The great people of Los Angeles are very lucky that I made the decision to go in and help!!!," he wrote. Her speech came a day after she implemented a curfew in a portion of downtown LA after five consecutive nights of demonstrations, which have escalated to clashes between protesters and law enforcement officers, as well as hundreds of arrests. Since the start of the protests, parts of downtown LA have been covered in graffiti, businesses have been looted and public property has been vandalized. TOPSHOT - A car burns as a demonstrator waves a Mexican national flag during a protest following federal immigration operations, in the Compton neighborhood of Los Angeles, California on June 7, 2025. RINGO CHIU/AFP via Getty Images During an interview Wednesday morning on CBS Los Angeles, Bass explained that the curfew will be extended until it is necessary to ensure public safety. The curfew currently runs for one square mile in the downtown area from the 5 Freeway to the 110 Freeway and from the 10 Freeway to where the 110 Freeway and 5 Freeway merge from 8 p.m. to 6 a.m. Bass has also taken to social media to share how the raids are affecting the city. In a post on X, she wrote, "Angelenos are trying to live their lives—going to work, caring for their families—while facing the constant threat of sudden immigration crackdowns." Other mayors from across Southern California joined Bass, calling for an end to the ICE raids. The Mayor of Huntington Park, Arturo Flores, a U.S. Marine Corps combat veteran, told reporters that the military neighborhoods. "The deployment of Marines on our U.S. soil is an alarming escalation that undermines the values of democracy," Flores said. "Our communities are not battle grounds." Flores said the ICE raids being carried out in his community and others across the region are a form of intimidation that traumatizes hardworking residents. He said fear-based tactics are being used to target immigrant communities. The Mayor of Paramount, Peggy Lemons, added that residents are choosing not to leave their homes or send their children to school out of fear that ICE will take them away. "For many in our city, this has been the most devastating time in recent memory," Lemons said. She said immigrants, who play such an important role in the makeup of the region, should not have to live in constant fear.