Tammy Baldwin Proposes Legislation To Close Carried Interest Tax Loophole

U.S. Sen. Tammy Baldwin, D-Wis., has introduced new legislation that seeks to close a tax loophole pertaining to carried interest that allows some investors to pay less income tax.

The new measure, called the Carried Interest Fairness Act, in effect seeks to block the loophole by stipulating that carried interest income be taxed like regular income. Right now, some investors are able to divert some wage income to fall under the lower the 23.8 percent capital gains tax rate instead of being subject to ordinary income tax rates of up to 40.9 percent. 

“Right now, the wealthiest Americans are gaming our tax system to get out of paying their fair share, passing their tax burden onto working Wisconsinites,” Baldwin said in a news release. 

Baldwin said that President Donald Trump has previously called the loophole “unfair to American workers.” She said that Trump had proposed eliminating the carried interest deduction during his 2016 presidential bid, according to the news release.

Baldwin’s legislation has about 13 co-sponsors – all Democrats – in the U.S. Senate and U.S. Rep. Marie Gluesenkamp Perez, D-Wash., has introduced a version in the U.S. House of Representatives. 

The fate of the bill is unclear given Republican control of both chambers of Congress and the White House.