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senate Bill S. 1020

Eliminating Tax Advantages for Investment Fund Managers

Argument in favor

The carried interest loophole benefits the wealthiest, most politically connected Americans who use it to pay a lower effective tax rate than many ordinary hard-working Americans. Managing partners at hedge funds and private equity firms need to pay their fair share of taxes.

Gfeiste's Opinion
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08/12/2017
When any small business makes a profit from their endeavors, the owners have to pay full income taxes. Just because investment managers and hedge fund managers are connected to Wall Street and persons in politics does not mean they should be exempt from taxes. It isn't targeting a specific industry - it is saying they can't be different than anyone else.
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Craig's Opinion
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08/12/2017
Eliminating tax loopholes for the 1% should be far more palatable to fiscal conservatives than "raising taxes". Let's seek areas such as this for moving bipartisan legislation forward!
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Paul's Opinion
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08/12/2017
The time is long past due that the most affluent start paying their fair share.
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Argument opposed

It would set a bad precedent for Congress to enact policy targeting the compensation system of one particular industry to score political points. Plus it would be of little fiscal benefit, as $1.5 billion annually in new tax revenue doesn’t help much with a budget deficit that tops $500 billion.

TuckerWantsLiberty's Opinion
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08/12/2017
What kind of arrogance do you have to have to think to yourself "We are allowing you to keep far too much of your income! We ought to be taking more of your money from you!" As if you have the first claim on their income. Want to eliminate their tax advantage? Then lower everyone else's taxes! There! Advantage gone!
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operaman's Opinion
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08/12/2017
Tammy waving the Socialist red flag. Wonder if she knows the difference between income and invested income. But like Progressives, they see others money as an investment in their future.
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JTJ's Opinion
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08/12/2017
No, vilification of the wealthy is the stupidest tactic in the democrats arsenal. Taxing the rich only raises prices for the rest of us. Stop buying into the wealth redistribution lies. Overhaul and simplify the tax code for everyone.
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Finance
    IntroducedMay 3rd, 2017

What is Senate Bill S. 1020?

This bill would reform the tax code by requiring managing partners (big wigs) at hedge funds and private equity firms to pay income taxes rather than long-term capital gains taxes as they earn money from “carried interest.” Basically, higher taxes than they're used to.  

What's carried interest you ask? Current law allows investment funds to be structured as a partnership by the managers, who may invest in the business and keep some of the fund’s profits as compensation. 

When the fund’s profits are long-term capital gains from investments, managers pay capital gains taxes — either 15 or 20 percent — rather than ordinary income taxes which may be up to 39.6 percent depending on their income level.

This legislation would require the carried interest income of managing partners be taxed as ordinary income rather than a capital gain. Penalties for underpayment would be increased. The bill would apply to any member of a partnership that provides the following services:

  • Advising the partnership about investing in, purchasing, or selling specific assets;

  • Managing, acquiring, or disposing of the partnership’s assets;

  • Arranging financing related to acquiring those assets.

Impact

Managing partners at hedge funds or private equity firms; and the IRS.

Cost of Senate Bill S. 1020

A CBO cost estimate is unavailable.

More Information

In-Depth: Sponsoring Sen. Tammy Baldwin (D-WI) introduced to close what she referred to as the “carried interest loophole” and ensure that investment fund managers pay more in taxes:

“If President Trump is in fact serious about closing the carried interest tax loophole for hedge fund managers on Wall Street, we are introducing legislation to do just that and we welcome his support so he can keep the promise he has made. With his one-page tax proposal that gives massive tax cuts for millionaires and billionaires, I am afraid President Trump is breaking his promise and is engaging in a classic Washington game of bait-and-switch. He needs to stand by his word to close the carried interest tax loophole and support our legislation.”

An op-ed opposed to this bill that appeared in the Washington Examiner argued that ending the treatment of investment income from partnerships as capital gains and taxing it instead at ordinary income tax rates would result in "lost economic opportunity" exceeding the tax revenue this bill would bring in. It included the following summation from a former Heritage Foundation executive who moved on to the Brookings Institution:

"This tax hike would not only threaten the economy generally. It would also jeopardize a particularly important and crucial part of the entrepreneurial economy -- capital-intensive firms that take the risk of investing in and restructuring underperforming enterprises and putting them onto a sound footing."

This legislation is cosponsored by 13 Democratic senators.


Of Note: According to an estimate by the Joint Committee on Taxation, this bill’s identical House companion would lead to $15.6 billion in new federal income tax revenue over the 2016-2025 period. It projects that tax revenue from carried interest would peak in 2018 at nearly $2.1 billion before declining to just over $1 billion in 2025.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user Eric Skiff)

AKA

Carried Interest Fairness Act of 2017

Official Title

A bill to amend the Internal Revenue Code of 1986 to provide for the proper tax treatment of personal service income earned in pass-thru entities.

    When any small business makes a profit from their endeavors, the owners have to pay full income taxes. Just because investment managers and hedge fund managers are connected to Wall Street and persons in politics does not mean they should be exempt from taxes. It isn't targeting a specific industry - it is saying they can't be different than anyone else.
    Like (130)
    Follow
    Share
    What kind of arrogance do you have to have to think to yourself "We are allowing you to keep far too much of your income! We ought to be taking more of your money from you!" As if you have the first claim on their income. Want to eliminate their tax advantage? Then lower everyone else's taxes! There! Advantage gone!
    Like (31)
    Follow
    Share
    Eliminating tax loopholes for the 1% should be far more palatable to fiscal conservatives than "raising taxes". Let's seek areas such as this for moving bipartisan legislation forward!
    Like (82)
    Follow
    Share
    The time is long past due that the most affluent start paying their fair share.
    Like (60)
    Follow
    Share
    Income derived from investments should be taxed at the same rate as income from labor.
    Like (39)
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    Yes. This is exactly the type of bill we need to see coming out of Congress. Unfair, prejudicial loopholes favoring the wealthy need to be eliminated from the tax code. Carried interest is income received just as my paychecks are and should be taxed in the same manner. This is income hedge fund managers and others regularly receive and use for expenses in much the same way the rest of us do with our earnings. There is really no difference and there shouldn't be any difference in the method of taxation. 45 himself has said so while stumping for votes. Indeed, this bill fulfills a promise 45 made to all of the everyday citizens who drank the orange Kool-aid. So put it on his desk and let him sign it or not. It will certainly be interesting to see whose interests he chooses to look out for and whether the liar, liar, pants on fire disappointment-in-chief will keep his promise to the people. I wouldn't hold my breath if I were you.
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    Tammy waving the Socialist red flag. Wonder if she knows the difference between income and invested income. But like Progressives, they see others money as an investment in their future.
    Like (24)
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    We need to stop letting wealthy make money off of our backs. Let's find more loopholes to close
    Like (20)
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    No, vilification of the wealthy is the stupidest tactic in the democrats arsenal. Taxing the rich only raises prices for the rest of us. Stop buying into the wealth redistribution lies. Overhaul and simplify the tax code for everyone.
    Like (20)
    Follow
    Share
    Absolutely!!!! Not one penny in tax cuts for millionaires and billionaires and giant corporations. Not one fucking penny!
    Like (17)
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    We, the people, are sick of being last on the list of benefits while the wealthy few pay their way into control of our country. Eliminate tax breaks for investment fund managers.
    Like (17)
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    Include churches in that taxation break too. They obviously feel they can be political , so no more tax exempt status for them and their fake evangelical bigotry.
    Like (17)
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    Absolutely. This loophole should have never been created in the first place.
    Like (14)
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    Absolutely yes. Why should they have a loophole. Tax breaks only for creation of jobs, goods, and services. Not manipulation.
    Like (13)
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    Yes!! Tax Wall Street!!
    Like (13)
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    The carried interest loophole only helps the wealthiest, most politically connected Americans because they can get a much lower effective tax rate than many regular hard-working Americans. Managing partners at hedge funds and private equity firms need to pay their fair share of taxes. Who says $1.5 billion annually in new tax revenue doesn’t help much with a budget deficit. Any help is help. It's a way to help the reduction of the deficit.
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    Operaman voted against this, so that tells me the morally sound option is to vote "Yay". Dude is a nut job.
    Like (9)
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    It's the fair way to do it.
    Like (7)
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    Pay what ever their fair share should be
    Like (7)
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    S.1020: yes, pay income tax. It's time to end tax cuts and subsidies for big business, but retain for small business. Tax reform should end loopholes for the wealthy. If you make the money, rejoice and pay your fair share.
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