Washington DC — On this Tax Day 2024, CEPR Co-Director Eileen Appelbaum issued the following statement in support of the Carried Interest Fairness Act introduced to Congress today:
“The Center for Economic and Policy Research (CEPR) welcomes the Carried Interest Fairness Act introduced by Senator Sherrod Brown today to close the loophole that lets some of the richest people in the US pay the same tax rate as American workers. The loophole treats the earnings of private equity managers from the sale of portfolio companies as capital gains rather than income, letting these and other investment managers pay a tax rate of just 23.8 percent rather than income tax rates of up to 40.8 percent.
“The lower capital gains rate is meant to encourage and reward people who use their own money to invest in capital projects that carry a risk of failure. But private equity and hedge fund managers are gambling with other people’s money. Their 20 percent share of investment funds’ earnings is a reward for the funds’ good performance — like the bonuses given to top performers at law firms and other companies. Those bonuses are taxed as ordinary income, and the same rules should apply to carried interest. There is no justification for this tax break.
“The Obama administration tried to kill the carried interest loophole. So did the Trump administration. But lobbyists for private equity and hedge fund managers defeated those efforts. The loophole continues to enrich fund managers unfairly. Closing it could raise as much as $6.5 billion over 10 years, tax revenue that could be used to address unmet needs rather than line the pockets of wealthy individuals.
“The time seems right to finally end this special break for investment managers. Americans of all political stripes are tired of unfair rules that rig the economy to benefit the rich and leave the rest of us carrying the bag. Ending the carried interest loophole is an important step toward restoring fairness.”
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