Opposition to Trump’s Tax Plan on Private Investment

NEW YORK (Reuters) – Private investment industry groups opposed U.S. President Donald Trump’s plan to close a loophole that allows private equity and hedge fund financiers to pay a lower capital gains tax rate on much of their income.

American Investment Council President Drew Maloney stated, “We encourage the Trump administration and Congress to keep this sound tax policy in place and unleash more long-term investment that supports jobs, workers, small businesses, and local communities.”

White House press secretary Karoline Leavitt informed reporters that Trump had outlined his tax priorities, which include closing the so-called carried interest tax loophole. This move could help offset planned tax cuts in areas such as overtime and tips.

In 2021, the Congressional Budget Office projected that closing the loophole could increase tax revenue by $14 billion over a decade. Discussions around modifying this tax rule, which impacts private fund managers’ compensation, have been ongoing for more than ten years. Fund managers often have their compensation linked to fund profits, which are taxed at long-term capital gains rates, significantly lower than regular income tax rates.

The National Venture Capital Association remarked, “Carried interest encourages smart, high-risk investments in innovative high-growth startups,” emphasizing that the existing system has been beneficial for technologies such as artificial intelligence and cryptocurrency. They warned that changing this tax treatment could disrupt such progress and negatively affect small investors.

Maloney highlighted that since Trump’s 2017 tax overhaul, the private equity industry has invested over $5.6 trillion in the U.S. economy and has supported 36,000 small businesses.