Baldwin, Manchin, Brown Lead Effort to Close Tax Loophole and Make Private Equity Pay Their Fair Share

WASHINGTON, D.C. – As Americans mark Tax Day 2024, U.S. Senators Tammy Baldwin (D-WI), Joe Manchin (D-WV), and Sherrod Brown (D-OH) introduced the Carried Interest Fairness Act to eliminate a tax loophole that benefits wealthy money managers on Wall Street. The current carried interest loophole allows investment managers to often pay almost half the tax rate compared to most other Wisconsin workers.

“Hardworking Wisconsin families should not be paying more in taxes than the wealthiest Americans. But right now, our tax code has loopholes that allow super wealthy hedge fund managers to avoid paying their fair share,” said Senator Baldwin. “By closing the carried interest loophole, we’ll make our tax code fairer for working families, cut the deficit, and ensure that those at the top of the food chain aren’t exploiting the system to further enrich themselves.”

“Currently, there is a loophole in our tax code that allows hedge fund managers to pay less in taxes for wage income than ordinary West Virginian and American workers, and these managers have taken advantage of it for far too long. Our commonsense legislation would close this loophole to ensure the wealthiest Americans are paying their fair share and contributing to our national economic growth rather than just their personal pockets. I urge my colleagues on both sides of the aisle to support this practical legislation that treats all workers fairly and moves to create a more equitable tax code,” said Senator Manchin.

“This loophole is yet another way wealthy special interests have rigged the system to work for them, at the expense of everyone else. Hedge funds and private equity firms shouldn’t pay less taxes than working people in Ohio. This bill is a commonsense solution to promote fairness and make Wall Street pay its fair share,” said Senator Brown.

The carried interest loophole allows investment managers to pay the lower 23.8 percent capital gains tax rate on income received as compensation, rather than the ordinary income tax rates of up to 40.8 percent that they would pay for the same amount of wage income. In 2017, Senate Republicans rejected Senator Baldwin’s amendment to their tax bill that was supported by every Democratic Senator to close the loophole.

The Carried Interest Fairness Act will require carried interest income to be taxed at ordinary wage rates. According to the Treasury proposal, closing this loophole will raise $6.5 billion in revenue over 10 years.

In addition to Senators Baldwin, Manchin, and Brown, this legislation is also co-sponsored by Senators Sheldon Whitehouse (D-RI), Chris Van Hollen (D-MD), Ed Markey (D-MA), Elizabeth Warren (D-MA), Mazie Hirono (D-HI), Amy Klobuchar (D-MN), Bernie Sanders (I-VT), Jack Reed (D-RI), Tim Kaine (D-VA), Peter Welch (D-VT), and Cory Booker (D-NJ).

The Carried Interest Fairness Act of 2024 is supported by AFL-CIO, American Federation of State County and Municipal Employees (AFSCME), Americans for Tax Fairness, Communications Workers of America (CWA), Main Street Alliance, Patriotic Millionaires, Public Citizen, Small Business Majority, United for Respect, NETWORK Lobby for Catholic Social Justice, National Women’s Law Center, Economic Policy Institute, and 20/20 Vision.

“The carried interest loophole is one of the clearest examples of how the wealthiest rig the tax code in their favor,” said David Kass, Executive Director of Americans for Tax Fairness. “Rich fund managers should not be allowed to pay a lower federal tax rate than registered nurses or powerline workers. Ending this loophole is a common sense win for tax fairness.”

A one-pager on this bill is available here. Full text of this legislation is available here.

###