The fiscal budget that the USA Government must enact by the end of 2025 could no longer grant tax break for carried interest profits and treat them as capital gains
Karoline Leavitt
US President Donald Trump aims to cancel the current tax allowances currently available for the carried interest gains of hedge funds and private equity firms, Bloomberg reported quoting the White House spokesperson Karoline Leavitt as making such a statement to journalists on 6 February, Thursday.
Trump would carry on such a reform in order to raise the necessary resources for to cancelling taxes on tips, social security, extra work payments and made in USA products.
The current system allows alternative asset managers to pay a 23.8% tax rate on carried interest earnings while the fiscal withdraw on salaries can be of up to 40%.
Financial markets reacted quickly to the news and shares of private equity giants posted severe losses at the closure of trading of 7 February, Friday. KKR shares have gone down 11% despite its positive 2024 results. TPG (-6.51%), Apollo Global Management (-4.40%), Ares Management (-3.98%), and Blackstone Group (-3.86%) also had negative performances. (see here a previous post by BeBeez).
Hedge fund and private equity may soon start an aggressive lobbying campaign for protecting their own interests. Drew Maloney, chairman of American Investment Council, already said that the present tax framework “reached its fair balance” with the Tax Cuts and Jobs Act of 2017 that implemented light changes for carried interest gains. Maloney urged lawmakers to “keep this sound tax policy and free up more long-term investment”.
In 2016, Trump already attempted to repeal the carried interest tax breaks and made that clear on the campaign trail, but later softened his stance, leaving the loophole largely intact in the 2017 tax overhaul.
