Donald Trump said “hedge fund guys are getting away with murder” when he called for ending a lucrative tax advantage for investment managers, but his published tax plan would give them an even bigger break.
Trump, the presumptive Republican nominee for president, has called for abolishing the special tax treatment that applies to “carried interest,” the share of investment funds’ profits that are paid to fund managers. Currently, carried interest is treated as capital-gains income, which makes it eligible for a tax rate as low as 23.8 percent -- much lower than the current top individual income tax rate of 39.6 percent.
But the plan published on Trump’s website would also create an entirely new tax rate -- just 15 percent -- for individuals who get income from business partnerships. That category includes most managers at hedge funds, private-equity funds and venture capital funds.
In other words, if Trump’s proposals came to pass, many investment managers’ tax rates would go from 23.8 percent to 15 percent.
“He’d be doing me a favor,” said Scott Fearon, the president of Crown Capital Management, a hedge fund and investment fund in Greenbrae, California. “He’d be cutting my taxes quite a bit.”
Spokesmen for Trump’s campaign didn’t respond to requests for comment in e-mails and telephone calls. On Sunday, Trump said on ABC’s “This Week” that if he’s elected, he expects his tax proposals would change during negotiations with Congress. Ultimately, tax rates for high earners might be higher than he has suggested, he said, but he’d try to preserve proposals to lower taxes on the middle class and on businesses. He didn’t mention his partnership proposal specifically.
“I will try and keep everything,” Trump said. “What I really want is lower on business, because business -- we’re the highest-taxed nation in the world. And I want lower on the middle class.”
Trump’s position on hedge fund taxes resurfaced Thursday when he named Steven Mnuchin, a hedge fund manager, to lead his national fundraising. Trump, a billionaire businessman and former reality-television star, had been largely self-funding his campaign.
Mnuchin declined to comment on Trump’s attacks on carried interest and hedge funds. But he said he’s already gotten calls from fellow hedge-fund managers and others on Wall Street expressing their support for the candidate.