Overview

• President Donald Trump has proposed eliminating the carried interest tax break, which allows fund managers to pay lower capital gains tax rates on their earnings instead of higher income tax rates.
• The carried interest loophole has been criticized by both Democrats and Republicans for benefiting the wealthy and reducing federal tax revenue by billions annually.
• Trump's renewed effort follows similar failed attempts by past administrations, including those of Obama and Biden, and his own 2017 tax reform initiative.
• Supporters of the loophole, such as the National Venture Capital Association, argue that its removal could discourage high-risk investments in startups and harm economic growth.
• If successful, closing the loophole could generate significant revenue for the federal government, but bipartisan resistance and lobbying from Wall Street make its passage uncertain.