The carried-interest loophole
Trump promised to close it. Both parties keep protecting it.
- Who acted
- Trump promised to close it in 2016 and 2025. His two tax laws left it open. Leaders in both parties have protected it over time.
- Who gained
- Private-equity and hedge-fund managers can treat part of their pay as lower-taxed investment gains.
- What working people pay
- Ordinary workers cannot relabel wages as investment gains. Closing the loophole could raise $13 billion to $100 billion over a decade, depending on the design.
- The connection
- Congress repeatedly chooses not to tax this compensation like ordinary wages.
Receipt: CBO and Yale Budget Lab revenue estimates
Carried interest lets hedge-fund and private-equity managers count part of their compensation as investment gains, which can receive a lower rate. A nurse or plumber cannot relabel wages that way.
Closing it would raise $13 billion a decade by one official score — up to $100 billion under broader designs. Trump promised to close it in 2016 and again in 2025. It survived both of his tax laws untouched.
Both parties have protected it. When they tell you there is no money, check this line first. It is the cleanest test of who a budget is actually for.
Trump promised twice to close the carried-interest loophole. Both parties protected it. Private-equity managers still get a tax option ordinary wages do not.
