We here at Dealbreaker are skeptical about the mortality of the carried interest loophole. Understandably so, we’d argue: For more than a dozen years, we’ve been listening to confident pronouncements that the wildly unpopular and even more wildly unjust bit of the tax code allowing hedge and private equity fund managers to pay a lower rate on the vast majority of their income than basically anyone else is about to finally go, in one way or another, but one party or the other. And then it just, well, doesn’t, for, you know, reasons.
Now, however, we’re promised that one miracle shall beget another. Nay, not merely beget but be an integral part of the miracle, specifically that after a year-and-a-half of bickering and infighting almost certain to consign them to minority status come November, Chuck Schumer has finally convinced Sen. Joe Manchin that doing something is better than nothing. And Manchin says he’ll go back to doing nothing unless he gets to do in the carried-interest loophole.
Mr. Manchin told reporters Thursday that he was adamant about the carried-interest language and wasn’t prepared to lose it.
“People that have benefited from carried interest for years and years and years knew that they had a good run,” he said. “It was long overdue to get rid of and you couldn’t justify it any more.”
Cue the celebrations! After 15 years, a thing that could never really be justified in the first place is finally going down for the dirt nap.
“Sometimes it actually is impossible to permanently defend the indefensible,” said Jason Furman, who has argued for changing the law as a think-tank expert, Obama campaign adviser, White House aide and economics professor over the past 15 years…. “We have been pursuing its demise for years and there is no excuse to allow it to continue,” [Rep. Bill Pascrell (D-N.J.)] said.
Except, well, it’s sort of going to continue.
[The Schumer-Manchin deal] would not eliminate the loophole entirely and could still allow rich business executives to have smaller tax bills than their secretaries…. It would extend that holding period to five years from three, while changing the way the period is calculated in hopes of reducing taxpayers’ ability to game the system and pay the lower 20 percent tax rate…. The longer holding period would only apply to those who make $400,000 per year or more….
But even that sort-of closing of the loophole is a done deal, right?
It was dropped out of the House tax bill last year after [Sen. Kyrsten] Sinema indicated she opposed ending the tax break…. Sinema’s office has so far declined to comment on the legislation. She did not attend a Senate Democratic Caucus meeting Thursday to discuss the deal, according to a senator in attendance.
Democrats Ready Carried-Interest Tax Hike After 15-Year Lobbying Campaign [WSJ]
Carried Interest Is Back in the Headlines. What Would a New Tax Proposal Do? [NYT]
Manchin says he is firm on closing tax loophole; Sinema absent from caucus meeting [The Hill]
In a major boost to Democrats, Manchin and Schumer announce deal for energy and health care bill [CNN]
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