WASHINGTON – Senator Tammy Baldwin (D-WI) and House Ways and Means Committee Ranking Member Sander Levin (D-MI) today introduced the Carried Interest Fairness Act of 2015. The legislation would end the carried interest loophole and ensure that income earned managing other people's money is taxed at the same ordinary income tax rates as that of the vast majority of Americans. In the Senate, Senator Baldwin was joined in introduction by Senators Al Franken (D-MN), Sheldon Whitehouse (D-RI), Richard Blumenthal (D-CT), Mazie Hirono (D-HI), Joe Manchin (D-WV), Jack Reed (D-RI), Bernie Sanders (I-VT), and Elizabeth Warren (D-MA).
“Instead of simply rewarding the wealthy with tax preferences, Washington needs to do more to respect hard work, invest in economic growth, and give the middle class a fair shot at getting ahead,” said Senator Baldwin. “At a time when too many Wall Street millionaires pay a lower effective tax rate than some truck drivers, teachers and nurses, we need to eliminate this loophole and make sure those at the top are paying their fair share.”
“At a time when income and wealth inequality in this country continues to grow at a staggering rate, we should not be allowing individuals to be taxed at a lower rate on managing other people’s money than ordinary hardworking Americans,” said Rep. Levin. “There’s no reason that these fund managers shouldn’t be paying their fair share of taxes on their income just like everyone else.”
The carried interest loophole allows certain investment fund managers – including private equity fund managers – to benefit from a tax loophole that allows them to take advantage of the preferential 20-percent tax long-term capital gains rate on income received as compensation, rather than the ordinary income tax rates of up to 39.6-percent that all other Americans pay. This legislation clarifies that this income is subject to ordinary income tax rates rather than the much lower long-term capital gains rate.
The House has passed legislation to address the carried interest loophole on four previous occasions, the most recent being in 2010, as an amendment to the Senate-passed Unemployment Compensation Extension Act of 2010.