In an interview with USA Today, presumptive Democratic presidential nominee Hillary Clinton vowed to take executive action without the help of Congress to close the carried interest tax loophole.
The loophole allows certain people in finance, such as those who work at hedge funds and private equity firms, to treat the income they make at work as capital gains. Capital gains income is usually the money made from investments, not from salaries, and is subject to a lower top tax rate of 23.8 percent, versus 39.6 for salary income. Yet the loophole allows these finance employees to enjoy the lower rate on the money they make in their jobs.
Clinton told the paper that if Congress doesn’t close the loophole on its own and ensure that hedge fund and private equity managers pay the higher rate on their income, she’ll direct the Treasury Department to end the different tax treatment under its regulatory authority.
Closing the carried interest loophole would bring the government an estimated $17 billion in new revenue over a decade. It could also help reduce income inequality, as economists have found that the favorable tax treatment for capital gains income has been the largest contributor to its growth “by far.”
Here’s How The One Percent Fares Under President Clinton Or President TrumpEconomy by CREDIT: AP Photo/Julie Jacobson Democratic presidential candidate Hillary Clinton’s tax plan would raise…thinkprogress.orgThe idea has been on Democrats’ agenda for some time. President Obama has included it in his budgets; as recently as last month Sen. Elizabeth Warren (D-MA) mentioned it as she helped launch a new coalition to put forward legislative proposals. But Clinton’s words stand out for promising to take action without Congress, versus tucking the plan into a broader package that would need to pass the House and Senate.
While Clinton tried to draw a contrast between her plan and presumptive Republican nominee Donald Trump’s tax proposal, he has also proposed closing the carried interest loophole. Yet he would lower the capital gains tax rate, allowing the wealthy who benefit from investment income to pay even less in taxes. Clinton also highlighted the fact that his plan has been found to give the wealthiest 1 percent of the country more than $400,000 in tax relief over a decade, or 40 percent of all the benefits in his package, compared to just $209 for the poorest, despite his promises of taxing the rich and offering relief for the middle class. “He’s either completely incoherent or he hasn’t thought one bit about his plan,” Clinton said.