{"id":253156,"date":"2025-05-23T04:51:44","date_gmt":"2025-05-23T04:51:44","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/finance\/gop-bill-cuts-social-spending-but-popular-tax-break-for-hedge-funds-survives\/"},"modified":"2025-05-23T04:51:44","modified_gmt":"2025-05-23T04:51:44","slug":"gop-bill-cuts-social-spending-but-popular-tax-break-for-hedge-funds-survives","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=253156","title":{"rendered":"GOP bill cuts social spending\u2014but popular tax break for hedge funds survives"},"content":{"rendered":"<p> <br \/>\n<br \/><img decoding=\"async\" src=\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2025\/05\/trump052225.jpg?w=2048\" \/><\/p>\n<p>When Republicans passed Donald Trump\u2019s \u201cbig, beautiful\u201d tax bill on Thursday, they included provisions to partially offset the costs, including significant cuts to Medicaid and food stamps. One area lawmakers didn\u2019t touch: the so-called carried interest loophole that offers beneficial tax treatment to wealthy private equity, venture capital and hedge fund managers.<\/p>\n<p>The <a href=\"https:\/\/fortune.com\/2024\/09\/17\/private-equity-carried-interest-trump-taxes-kamala-harris-barack-obama-bain-deals-profit\/?utm_source=search&amp;utm_medium=suggested_search&amp;utm_campaign=search_link_clicks\">carried interest loophole<\/a> refers to a provision in the U.S. tax code that allows investment fund managers, like private equity executives, to pay a lower tax rate than normal, everyday workers. Private equity firms typically raise outside capital from investors like pension funds, insurance companies and high net worth individuals. They use this money, called the fund, to invest in companies, frequently taking control of these businesses. PE executives usually receive a share of the profits\u2014the carry\u2014for managing investments.&nbsp;<\/p>\n<p>When a PE fund sells an asset, likely a portfolio company, at a higher price than what they bought, PE execs get carry. If the asset is sold after three years, the profit is taxed at a long-term capital gains rate of 20%. If they sell the business before the three years, the carry is taxed at a short term capital gains rate of 37%.&nbsp;<\/p>\n<p>The problem is that the 20% tax rate is lower than what many everyday U.S. workers pay. A couple filing jointly, making under $206,700, faces a 22% tax rate, while a single person who makes under $197,300 is taxed at 24%, according to <a href=\"https:\/\/www.cwfphilly.org\/2025-tax-brackets-and-standard-deduction\/\">2025 tax brackets<\/a>. Meanwhile, many finance executives&#8217; hefty salaries place them in the top 35% or 37% tax brackets\u2014so the 20% carried interest loophole represents both a special perk for fund managers, and foregone tax revenue for the federal government.<\/p>\n<p>Carried interest has been a perennial hot button issue. For roughly the past 20 years, lawmakers, including President Barack Obama, Sen. Elizabeth Warren (D-Mass.) and even Trump himself, have called for carried interest to be changed so that it is be treated as ordinary income. Several bills have been introduced, including one from Sen. Tammy Baldwin (D-Wis.), who in February <a href=\"https:\/\/www.baldwin.senate.gov\/news\/press-releases\/baldwin-leads-colleagues-on-bill-to-close-tax-loophole-and-make-wall-street-pay-its-fair-share\">wanted<\/a> to tax carried interest at the same rate that ordinary workers pay on their income.\u00a0\u00a0<\/p>\n<p>Trump, when he first ran for president in 2016, <a href=\"https:\/\/truthout.org\/articles\/despite-trump-campaign-promise-billionaires-tax-loophole-survives-again\/\">vowed<\/a> to change the carried interest loophole but didn\u2019t follow through. Instead, his tax bill from 2017, the Tax Cuts and Jobs Act, made it harder to qualify for long-term capital gains rates of 20%. The 2017 law changed the holding period from one year to three years, which means PE firms must<a href=\"https:\/\/fortune.com\/2024\/09\/17\/private-equity-carried-interest-trump-taxes-kamala-harris-barack-obama-bain-deals-profit\/\"> own an asset<\/a> for three years before they can sell and have the profit taxed at the long-term capital gains rate of 20%. Trump also spoke to Republican lawmakers about <a href=\"https:\/\/www.dlapiper.com\/en\/insights\/publications\/2025\/02\/2025-carried-interest-tax-reform-and-impact-on-sponsors-and-investors\">changing<\/a> carried interest in February but took no action.&nbsp;&nbsp;&nbsp;<\/p>\n<p>On Thursday, the Trump-endored tax bill passed by the House doesn\u2019t mention carried interest. This means that the changes imposed by Trump\u2019s 2017 Tax Cuts and Jobs Act, which made it harder to secure long-term capital gains, remain in place.\u00a0<\/p>\n<p>\u201cThe President\u2019s 2017 law struck the right balance on carried interest, and we\u2019re pleased that the new legislation will encourage more long-term investment across America,\u201d said the American Investment Council, lobbyists for the PE industry, in a statement to <em>Fortune<\/em> Thursday.<\/p>\n<p>\u201cWhat came out of the House this morning doesn\u2019t affect carried interest. The current carried interest will stay,\u201d added Mark Leeds, a tax partner at law firm Pillsbury Winthrop Shaw Pittman.<\/p>\n<p>It\u2019s still too early for private equity to claim victory. The tax bill will now head to the Senate, which will likely make modifications before the legislation is handed to President Trump to sign. \u201cIt\u2019s possible the Senate could still make changes to carried interest,\u201d Leeds said.<\/p>\n<p>This story was originally featured on <a href=\"https:\/\/fortune.com\/2025\/05\/23\/president-trump-tax-bill-carried-interest-private-equity-hedge-funds-venture-capital-house-senate\/\" target=\"_blank\">Fortune.com<\/a><\/p>\n\n","protected":false},"excerpt":{"rendered":"<p>When Republicans passed Donald Trump\u2019s \u201cbig, beautiful\u201d tax bill on Thursday, they included provisions to partially offset the costs, including significant cuts to Medicaid and food stamps. One area lawmakers didn\u2019t touch: the so-called carried interest loophole that offers beneficial tax treatment to wealthy private equity, venture capital and hedge fund managers. The carried interest [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":253157,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[93],"tags":[6795,6792,11339,11257,36588,23212,1340,10974,92023,20091,7356],"dealstore":[],"offerexpiration":[],"class_list":["post-253156","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-bill","tag-break","tag-cuts","tag-funds","tag-gop","tag-hedge","tag-popular","tag-social","tag-spendingbut","tag-survives","tag-tax"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>GOP bill cuts social spending\u2014but popular tax break for hedge funds survives - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=253156\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"GOP bill cuts social spending\u2014but popular tax break for hedge funds survives - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"When Republicans passed Donald Trump\u2019s \u201cbig, beautiful\u201d tax bill on Thursday, they included provisions to partially offset the costs, including significant cuts to Medicaid and food stamps. 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