ICYMI: 19 Free Market Groups Oppose Tax Hikes on Carried Interest Capital Gains
“Instead of hitting American investors and companies with massive tax hikes, Congress should focus on making the pro-growth tax cuts from the 2017 Tax Cuts and Jobs Act permanent and reducing wasteful government spending.”
This week, Americans for Tax Reform led a coalition of 18 free-market organizations in releasing a letter opposing recent proposals to raise taxes on private fund investments that support small businesses, innovative industries, well-paying American jobs, and local companies in communities across the country. The letter cites a study from Yale University that found that “tax hike[s] on carried interest would raise taxes by an estimated $6.5 billion over the next decade while discouraging investment, reducing economic growth, and growing the size of government.”
The private equity industry invested more than $5.6 trillion into the U.S. economy and supported more than 39,000 small businesses after the pro-growth changes of the 2017 Tax Cuts and Jobs Act incentivized long-term private capital, investments and innovations.
Today, the letter was covered by both POLITICO Morning Tax and POLITICO Morning Money, – which wrote: “The leaders of 19 think tanks and anti-tax groups, led by Americans for Tax Reform’s Grover Norquist, have published a letter urging lawmakers to reject Democratic-sponsored legislation and ‘similar proposals’ that would raise taxes on investment profits collected by private equity managers and other investment firms.”
Read the full letter and the list of signatories below:
Americans for Tax Reform: Free Market Groups, Advocates Oppose Tax Hikes on Carried Interest Investment Income
February 19, 2025
Today, Americans for Tax Reform, with 18 other free market groups and advocates, released a coalition letter in opposition to proposals that would raise taxes on carried interest investment income.
Specifically, the Carried Interest Fairness Act would raise taxes by an estimated $6.5 billion over the next decade while discouraging investment, reducing economic growth, and growing the size of government.
Instead of hitting American investors and companies with massive tax hikes, Congress should focus on making the pro-growth tax cuts from the 2017 Tax Cuts and Jobs Act permanent and reducing wasteful government spending.
To read the letter in full, click here or see below.
February 19th, 2025
Dear Members of Congress,
We the undersigned organizations write in opposition to proposals that would raise taxes on carried interest investment income.
Carried interest is a share of profits earned by general partners of private equity, venture capital, and real estate. General partners in a firm are paid as if it were a return on their investment rather than ordinary income and are taxed as a capital gain as such.
We urge Congress to reject the misnamed “Carried Interest Fairness Act,” legislation recently reintroduced by Senators Tammy Baldwin, Elizabeth Warren, Bernie Sanders, and other progressive members of Congress. This legislation that would increase the tax rate on carried interest investment by 70%, from 23.8% to 40.8%.
Similarly, Nancy Pelosi and House Democrats attempted to raise taxes on carried interest in their partisan Build Back Better legislation, as did President Joe Biden in his budget proposals. The 2024 Democratic Party Platform also called for raising taxes on carried interest.
This latest tax hike on carried interest would raise taxes by an estimated $6.5 billion over the next decade while discouraging investment, reducing economic growth, and growing the size of government.
This legislation reflects the longstanding agenda of some to tax all capital gains as ordinary income. Taxing carried interest is the opening salvo in this effort. On principle, carried interest should be taxed as capital gains and not at artificially higher rates.
The tax treatment of carried interest is not a “loophole” as some have long mischaracterized. In fact, the current tax treatment of carried interest is an intentional, pro-growth feature of the tax code for more than 100 years that incentivizes risk-taking and entrepreneurship, benefiting investors, public pension funds and retirees.
A 2021 study analyzing venture capital funds found that changing the tax treatment of carried interest “to ordinary income rates would significantly reduce the attractiveness of forming a new fund.” A higher tax rate limits the availability of affordable investment options for American workers and retirees.
We urge you to oppose the misnamed “Carried Interest Fairness Act” and reject similar proposals that would raise taxes on carried interest investment income.
Instead of hitting American investors and companies with massive tax hikes, Congress should focus on making the pro-growth tax cuts from the 2017 Tax Cuts and Jobs Act permanent and reducing wasteful government spending.
Onwards,
Alfredo Ortiz, Chief Executive Officer, Job Creators Network
Brandon Arnold, Executive Vice President, National Taxpayers Union
John Tamny, President, Parkview Institute
Gordon Gray, Executive Director, Pinpoint Policy Institute
Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council
David Williams, President, Taxpayers Protection Alliance
Steve Pociask, CEO,The American Consumer Institute
James Taylor, President, The Heartland Institute
James L. Martin, Founder/Chairman, 60 Plus Association
