Gluesenkamp Perez, Beyer Introduce Bill to Close Carried Interest Loophole, Create Fairer Tax System for Working Families

Today, Rep. Marie Gluesenkamp Perez (WA-03) and Rep. Don Beyer (VA-08) introduced the Carried Interest Fairness Act to eliminate a tax loophole that benefits wealthy money managers on Wall Street. The current carried interest loophole allows investment managers to often pay almost half the tax rate compared to most other Southwest Washington workers.

The carried interest loophole allows investment managers to pay the lower 23.8 percent capital gains tax rate on income received as compensation, rather than the ordinary income tax rates of up to 40.8 percent that they would pay for the same amount of wage income. The Carried Interest Fairness Act requires carried interest income to be taxed at ordinary wage rates. According to the Treasury proposal, closing this loophole will raise $6.5 billion in revenue over 10 years.

“When wealthy investors have loopholes that give them a lower tax rate than hardworking Southwest Washington families, it’s a serious matter of fairness,” said Rep. Gluesenkamp Perez. “Our legislation would ensure carried interest income is taxed at ordinary rates – which is an important step toward leveling the playing field in our tax system. It’ll help us generate revenue to take on our deficit and support critical programs rural communities rely on.”

“The carried interest loophole, which allows hedge fund managers to pay a lower rate on their taxes than ordinary working people, is terrible policy. There is no sound economic rationale for imposing a lower tax rate on the fees private equity managers charge their customers than the rates working-class Americans pay,” said Rep. Beyer. “This bill would close a loophole, raise revenue, and make our tax code fairer.”

“The carried interest tax loophole stands as one of the most glaring examples of how the ultra-wealthy exploit and rig our broken tax system to their advantage,” said David Kass, executive director of Americans for Tax Fairness. “It’s common sense – Wall Street hedge fund managers shouldn’t pay lower federal tax rates than nurses, teachers, and most working Americans. This change is long overdue and represents a critical step toward a fairer tax system that ensures these uber-wealthy individuals pay their fair share like everyone else.”

“There are a lot of economically and morally unjustifiable tax loopholes that disproportionately benefit wealthy people like me, but the carried interest loophole may just take the cake,” said Morris Pearl, Chair of the Patriotic Millionaires and a former Managing Director at BlackRock. “Ultra-wealthy hedge fund managers should not receive a tax break on the income they earn managing other people’s money, as the last time I checked, nurses don’t get a tax break on the money they make ‘managing’ people’s lives with their blood, sweat, and tears. It’s time for lawmakers to pass the Carried Interest Fairness Act and close this egregious loophole once and for all.”

“There is no reason that private equity managers, some of the wealthiest people in the country, should get away with paying lower tax rates than average families, especially as the care crisis continues to strain family budgets,” said Melissa Boteach, Vice President for Income Security and Child Care/Early Learning at the National Women’s Law Center. “Closing the carried interest loophole is an important step towards making sure the wealthiest are paying their fair share and that our tax code works for all of us, not just those at the top.”

The legislation is endorsed by Communications Workers of America, Americans for Tax Fairness, the American Federation of Teachers (AFT), Public Citizen, American Federation of State, County and Municipal Employees (AFSCME), Alliance for Retired Americans, Americans for Financial Reform, Take on Wall Street, Patriotic Millionaires, 20/20 Vision, Main Street Alliance, American Federation of Government Employees, Small Business Minority, Economic Policy Institute, and the National Women’s Law Center.

Full text of the bill is available here.

Sen. Tammy Baldwin (WI) introduced companion legislation in the U.S. Senate.