President Trump’s first major legislative act, the passage of the GOP tax bill, came with a load of compromises to all camps within the Republican Party, but it left out one little noticed, but important, campaign promise – an elimination of the carried interest deduction.
“As part of this reform, we will eliminate the carried interest deduction and other special interest loopholes that have been so good for Wall Street investors, and for people like me, but unfair to American workers,” said President Trump in a Detroit, Michigan speech, and indeed his administration would have liked to have carried through on this promise, but sadly were left with what Congress was willing to give them.
“We would have cut carried interest,” White House chief economic adviser Gary Cohn said. “We probably tried 25 times.” But the administration “hit opposition in that big white building with the dome at the other end of Pennsylvania Avenue every time we tried. It is just the reality of the political system.”
During the Thursday edition of The Intelligence Report With Trish Regan on Fox Business Network, colorful conservative commentator Ben Stein hammered the GOP for caving to Big Business at the expense of ordinary workers.
“First of all I want to start with just the lobbying money in Washington and what the private equity industry has effectively done here which I would say, sir, is by — buying themselves a tax cut. Walk us through why this is wrong?” said Regan.
“That is just the way Washington operates,” said Stein. “The way politics operates. People need money for campaigns. They need money for their staffs and to live a nice life. People in private equity have lots and lots of money and they can give it to them.”
Using simple terms, Stein then went on to explain the history and meaning of carried interest, and why Americans should care.
“This started out a long time ago, Trish,” said Stein. “This started out with oil companies. They originated carried interest rule. The carried interest rule which sounds more complicated than it is, basically allows to you deduct as if you had invested money when you really just invested labor and thoughts and ideas and therefore to be taxed at capital gains rates instead of ordinary income tax rates when you get paid off for these things. The difference is stupendous when you talk about people with very, very high incomes. If they take a little tiny bit of that, pay the people in Washington, so those people can then lower their taxes, it’s incredible bargain. There is no greater leverage in the world than giving money to political candidates.”
“Yeah. I mean this is what Americans rebelled against, right?” responded Regan. “I think in part this election and reason why they sent Donald Trump there. I found it very refreshing on the campaign trail when he kept saying he wanted to close this carried interest loophole. But of course there was absolutely no will. Ben, I will tell you, I was shocked. When I looked at both the house and Senate plans, not any of them bothered to deal with this. Then they came up with some little fix down the road saying well if you hold your investment for three years… well Ben, you and I both know, private equity investors they always hold for at least three years.”
“They hold them for very long time. And by the way, that whole private equity thing is very much of a scam because, what they do trade these companies back and forth among themselves,” Stein said. “They don’t really do much that much to turn them around, change them around, it is just a way of playing musical chairs. There are enough chairs and they wind up making great, great deal of money. Unfortunately some of the people we admire most in the country have a lot to do with this.”
Regan then displayed a chart showing how much key senators got from private equity and investment firms:
“Absolutely,” said Stein. “They see a bright shining light. What does that bright shining light say? Money, if you vote our way.”
The network then showed a montage of interviews of officials including Treasure Secretary Steve Mnuchin downplaying the effect of carried interest.
“It’s insane what you can buy in politics in terms of the tax code and the idea that people don’t understand it and therefore we can do it – that’s just a disgraceful excuse,” Stein concluded
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