Close the Hedge Fund Manager Tax Loophole to Protect Feds from Sequestration

Categories: Sequester, Retirees

With a possible government shutdown in a little over 50 days, AFGE is joining a coalition of 52 good government organizations in urging senators to close an outrageous tax loophole that allows hedge funds, private equity firms, and venture capitalists to avoid billions of dollars in taxes each year.

The coalition is also urging the senators to co-sponsor Sen. Tammy Baldwin of Wisconsin’s legislation that would close this so-called carried interest tax loophole and generate at least $15.6 billion over 10 years. Revenue from closing the tax loophole should then be used to raise budget caps above harmful sequestration levels.

Baldwin’s Carried Interest Fairness Act is urgently needed because under the current rule, these hedge fund managers pay a little over 20% in taxes on their capital gain income as opposed to the top rate of 39.6% for middle-class workers that nurses, law enforcement officers, and most others are required to pay. 

Congress has so far refused to close this tax loophole and instead insisted on cutting funding for education, infrastructure, public health and safety and other programs every American relies on. Senate Majority Leader Mitch McConnell also is reportedly considering “a reduction in cost-of-living adjustments to Social Security recipients and new restrictions on Medicare, including limiting benefits to the rich and raising the eligibility age,” as part of any deal providing sequester relief.

“The carried interest loophole plays an important role in the growing gap between the richest 1% and everyone else in America,” the coalition states. “Consider that the top-25 hedge fund managers earned a total of $11.6 billion in 2014, a ‘bad’ year, and $21.2 billion in 2013. By comparison, the country’s 158,000 kindergarten teachers earn about $8.5 billion a year in total.” 

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