Imagine a tax scam so outrageous that even Donald Trump admits it’s inexcusable. Hard to believe, I realize, but it’s all on tape right here – along with more information about how organizers are sidestepping the cash-drunk powers that be in Washington and working to put billions of dollars back into state budgets.
The scam is called the carried interest loophole and its beneficiaries are private equity partners and hedge fund moguls – aka virtually everyone at the top of the Trump Administration. Now that he’s in office, Trump isn’t touching it, which surprises exactly no one.
The carried interest loophole allows partners at private-equity firms and hedge funds to treat a big portion of their income as capital gains – that is, as profit on the sale of an investment. Capital gains are taxed at 20 percent, plus a 3.8 percent surtax typically. Compare that to the tax rate for ordinary income – salaries earned by the rest of us – which is 39.6 percent, and you see the problem.
The rational justification for carried interest is nonexistent. The term itself comes from the 12th century when ship captains where paid by percentages of the sale of the cargo they carried. The idea, which was eventually enshrined in the tax code, was to encourage certain kinds of investments by rewarding those who took risks to build businesses. How that got twisted to reward private equity and hedge fund partners who make the vast majority of their millions in fees is lost to history. Post