Pascrell Unveils Ending Wall Street Tax Giveaway Act

Pascrell Unveils Ending Wall Street Tax Giveaway Act

Infamous carried interest loophole has long enriched billionaires

 

WASHINGTON, DC – Congressman Bill Pascrell, Jr. (D-NJ-09), the Ranking Member of the Ways and Means Subcommittee on Oversight, and Reps. Don Beyer (D-VA-08) and Katie Porter (D-CA-47) today introduced the Ending Wall Street Tax Giveaway Act, legislation to finally close one of the most outrageous loopholes in the entire federal tax code, so-called carried interest. Pascrell has championed closing the carried interest loophole for years, introducing legislation in the 116th Congress and 117th Congress.

 

 

“America’s unfair two-tier system remains entrenched because of loopholes like this one,” said Rep. Pascrell. “Our tax code is littered with special breaks for the people at the very top, but the carried interest loophole stands among the most indefensible. It is a giveaway to private equity tycoons – some of the wealthiest people on the planet – that helps them routinely pay lower tax rates than their secretaries and janitors. All Americans should know this loophole steals from them to enrich the lives of millionaires and billionaires. It is time to finally close Wall Street’s favorite loophole.”

 

“The carried interest loophole, which allows hedge fund managers to pay a lower rate on their taxes than ordinary working people, is deeply unfair. 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. This bill would correct this imbalance and raise billions of dollars of needed revenue,” said Rep. Beyer.

 

“The carried interest loophole provides a free pass for ultra-wealthy Wall Street executives to slash their taxes,” said Rep. Porter. “When these elite private fund managers skip out on paying their fair share, the rest of us as taxpayers are forced to pick up the bill. I am proud to reintroduce legislation with my colleagues Bill Pascrell and Don Beyer to end this corporate giveaway.”

 

“Americans for Tax Fairness strongly endorses this legislation to ensure that private equity, real estate, and hedge fund executives pay the same top tax rate on their income that other working Americans pay on theirs. This egregious loophole has survived thanks to hefty campaign contributions and backroom deals. It’s time to close this loophole once and for all,” said David Kass, Executive Director of Americans for Tax Fairness.

“There is absolutely no economic or moral justification for the continued existence of the carried interest loophole. Ultra-wealthy private equity and hedge fund managers do not need or deserve preferential tax treatment on income they earn from managing other people’s money. There is no shortage of people willing to work as hedge fund managers. If Congress needs to give a special tax incentive to get people to fill a need, they should have teachers or emergency room nurses pay half the tax rates that everyone else pays. Lawmakers need to show the American people that they have the guts to stand up to Wall Street and pass the Ending Wall Street Tax Giveaway Act to get rid of this egregious, pointless, and outrageous loophole once and for all,” said Morris Pearl, Chair of Patriotic Millionaires.

 

“Private equity and hedge fund executives rig the tax code so they pay less than Black, white, and Brown working people,” said Porter McConnell, Take on Wall Street Campaign Director at Americans for Financial Reform. “Carried interest is the textbook example of Wall Street’s tax cheats. It’s time to pass the Ending Wall Street Tax Giveaway Act and close this outrageous loophole.”

 

“For far too long, the carried interest loophole has allowed millionaire Wall Street hedge fund and private equity managers to pay lower tax rates than the working families who carry and continue to build the American economy. CWA is proud to support the Ending Wall Street Tax Giveaway Act, as it levels the playing field by closing that arcane tax loophole and forcing Wall Street to pay their fair share.” said Dan Mauer, Director of Government Affairs for the Communications Workers of America (CWA).

 

First enshrined into law in 1954, the carried interest exception was originally designed to help certain subsets of workers in speculative industries like oil and gas drilling, but has since grown to become a loophole used primarily in the financial services industry. Today, the largest beneficiaries of carried interest are private equity partners who use the loophole to avoid paying income taxes on compensation earned from managing other people’s money. The carried interest loophole allows these Wall Street firms to pay the lower capital gains rate on their lucrative income (15 or 20%), rather than paying ordinary income rates (up to 37%) that all other Americans pay on their earnings from work.

 

The ability of private-equity and hedge fund financiers to use the loophole impacts income inequality, as this tiny subset of executives make up some of the wealthiest citizens in the world. Indeed, since the recession, private equity has reaped historic profits, and at least 18 private equity executives are estimated to be worth two billion dollars or more each.

 

The Ending Wall Street Tax Giveaway Act would close this loophole by taxing carried interest compensation at ordinary income tax rates and treating it as wage income subject to employment taxes. The capital gains break would still apply for those who truly put money at risk, such as private equity partners who invest their own money in their funds. But all income from managing a firm’s assets would be taxed at ordinary rates. The Congressional Budget Office has estimated that closing the loophole will return $11.5 billion to American taxpayers over ten years, while experts have suggested it could bring in more than ten times as much to the Treasury.

 

As Chairman of the Subcommittee on Oversight in the 117th Congress and Ranking Member in the 118th Congress, Pascrell has made tax fairness his top priority.

 

On December 8, 2021, Pascrell convened a hearing on “Tax Havens in America and Hidden Wealth” to investigate ways the wealthy avoid paying their fair share. On May 18, 2022, Pascrell convened a hearing on “Tax Fairness and the IRS” where he unveiled a GAO report written at his request that found plummeting audit rates over the last decade, disproportionately benefiting wealthy Americans.

 

On March 9, 2023, Pascrell led fellow Democratic members of the Oversight Subcommittee in a letter to IRS Commissioner Daniel Werfel urging him to direct IRA funding toward overhauling the agency’s entire auditing regime to ensure wealthy tax scofflaws and big business tax cheats pay their fair share. On April 13, 2023, Pascrell wrote to Commissioner Werfel urging the agency to step up its efforts to address and understand the ballooning national tax gap.

 

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