“Mr. Trump campaigned on giving regular Americans a fair shake. His repeated support for closing this egregious loophole combined with Americans desiring real reform gives me genuine hope for passage this Congress,” Pascrell said in a statement issued through a spokesman.

Historically, performance fees received the more-favorable tax treatment as long as a fund held the investment for at least a year, but the 2017 tax law increased the minimum holding period to three years. That hit some faster-trading hedge funds hard, but was less painful for private-equity and venture-capital funds, which tend to have longer holding periods.

Protected by Billionaires
Private-equity magnates such as Blackstone’s Stephen Schwarzman, who is also a Trump adviser, have become protective of a break that helped make them billionaires. When President Barack Obama tried to close the loophole, Schwarzman reportedly likened it to Hitler invading Poland. He later apologized for the comparison.

For investment firms, it could have been worse. As the 2017 tax law was being written, Gary Cohn, then the White House national economic adviser, said the break should be eliminated. Ultimately, Treasury Secretary Steven Mnuchin and some congressional Republicans fought for a compromise: Instead of taxing all carried interest as ordinary income, the threshold for taxing it as a capital gain would rise to three years from one year.

In a Fox News interview in May, Trump said he’d still like to end the benefit and claimed that he traded keeping the loophole open in the 2017 legislation in exchange for a lower corporate tax rate. But in fact, raising the tax rate for carried interest would have raised more revenue in the tax bill, making it easier to lower corporate rates.

‘Likely Target’
Analysts note that the tax treatment of carried interest doesn’t have a large effect on the federal budget either way, making the change a strong political talking point without a real fiscal impact.

“It certainly seems to be a likely target given the current environment. That being said, it is clearly not going to be much of a revenue-raiser,” said Don Snyder, a tax lobbyist for Federal Policy Group in Washington.

Changing the treatment of carried interest also carries significant policy hurdles, Snyder said. For one, taxing all partnership gains the same way would encourage short-term trading, since hedge funds would no longer have a tax incentive to hold an investment for the long term, he said.

Trade associations that support keeping the break say that eliminating it could reduce investments in companies and kill jobs. The American Investment Council, a trade association for private-equity firms, releases an annual study calculating private-equity investment by congressional district.

“Raising taxes on carried interest capital gains will destroy jobs, decrease investment, and discourage entrepreneurship across America,” the group’s president, Drew Maloney said in a statement.