Wyden, Whitehouse, King Lead Colleagues to Introduce Bill to Ensure Hedge Fund Managers Pay Fair Share in Taxes
Bill would close the carried interest loophole by preventing the deferral of tax payments
Washington, D.C. – Senate Finance Committee Chair Ron Wyden, D-Ore., along with Senators Sheldon Whitehouse, D-R.I. and Angus King, I-Maine, today led colleagues in introducing legislation to close the carried interest loophole and ensure hedge fund managers and private equity CEOs pay their fair share in taxes.
“Our nation’s tax code is riddled with loopholes that give a leg up to those at the very top, while everyone else is forced to play by a different set of rules,” Wyden said. “Hard-working Americans who pay taxes diligently out of each paycheck are rightfully demanding a tax code that treats everyone fairly. Closing the carried interest loophole is a no-brainer as Congress works to restore fairness to the tax code and ensure ultra-wealthy Americans finally start paying their fair share.”
“Wealthy hedge fund managers and private equity executives exploit the carried interest loophole to skip out on paying their fair share. Financiers shouldn’t be able to pay lower rates than hardworking middle-class Americans. We can make the tax code fairer for everyone by striking the carried interest loophole and passing my Buffett Rule legislation to ensure the highest earners pay at least a 30 percent effective tax rate,” said Senator Whitehouse.
“Hardworking Americans across the country, and people in Maine, pay their fair share in taxes to support critical federal services like infrastructure, healthcare, and affordable housing,” said Senator King. “Meanwhile, the tax law allows wealthy private equity managers to pay a low rate of tax on their compensation. That’s just wrong. The Ending the Carried Interest Loophole Act would level the playing field, ensuring that fund managers pay their fair share to support the country where they have realized such extraordinary opportunity.”
Wyden, Whitehouse and King were joined by U.S. Senators Elizabeth Warren, D-Mass., Bernie Sanders, I-Vt. Brian Schatz, D-Hawaii, Jack Reed, D-R.I., John Fetterman, D-Pa., Edward J. Markey, D-Mass., and Mazie Hirono, D-Hawaii, in introducing the legislation.
The carried interest loophole has long been used by executives of hedge funds and private equity firms to re-characterize their compensation and secure a lower tax rate or put off paying taxes indefinitely. The Ending the Carried Interest Loophole Act would close that loophole, and prevent re-characterization of income by requiring fund managers to recognize their annual compensation, which would then be taxed at ordinary income rates.
Senator Wyden has been working to shed light on the legal schemes used by ultra-wealthy Americans to avoid paying their fair share in taxes. Last week, he convened a hearing during which the Finance Committee heard a firsthand account of how wealthy taxpayers use legal loopholes in the U.S. tax code to dodge taxes.
Additional Statements of Support:
David Kass, executive director Americans for Tax Fairness: "The carried interest loophole is one of the clearest examples of how the wealthiest rig the tax code in their favor. Rich hedge fund managers should not be allowed to continue to endlessly delay paying taxes on a big part of their income, and then when they do pay, do so at a lower federal tax rate than the people who answer their phones or teach their children. Ending this loophole is a common sense win for tax fairness."
Morris Pearl, Chair of the Patriotic Millionaires and former managing director at BlackRock: “The carried interest loophole is the epitome of everything that is wrong with our tax code. There is no reason - policy, political, or otherwise - for billionaire hedge fund managers and private equity executives to get preferential tax treatment on income they earn managing other people's investments. Moreover, there is no justification for allowing the deferral of paying taxes year after year, a privilege not afforded to average taxpayers. Congress must pass the Ending the Carried Interest Loophole Act without delay and end this egregious, unjustifiable loophole once and for all.”
John Arensmeyer, founder & CEO, Small Business Majority: “Small businesses believe it's time for wealthy Americans to pay their fair share in taxes and stop benefiting from an unfair tax system that has disadvantaged entrepreneurs for decades. We are happy to support Senator Wyden's ‘Ending the Carried Interest Loophole Act’ that will close the carried interest loophole and prevent fund managers from paying lower taxes on their wealth than hardworking Americans and small business owners do on their wages.”
Legislative text is available here.
A detailed summary of the legislation is available here.
A one-page summary of the legislation is available here.
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