EXCLUSIVE — Sen. Tammy Baldwin (D-WI) filed an amendment Monday during a marathon voting session on President Donald Trump’s tax cut and spending bill to close the carried interest “loophole” for money managers on Wall Street.
The amendment, first shared with the Washington Examiner, presents a rare harmonization between Democrats and Trump, who pushed congressional Republicans to include a similar provision in his One Big Beautiful Bill Act. However, the GOP left it out, prompting Baldwin to try to force Republicans to take an on-the-record position that could be viewed as bucking Trump.
“It is absurd that Wall Street investors can game the system and pay less in taxes than Wisconsin firefighters, teachers, and small-business owners,” Baldwin said in a statement. “Donald Trump has claimed to support closing this tax loophole that lets Wall Street get off the hook paying their fair share, and now is the time for him to finally put some pressure on Senate Republicans to support my amendment and show they support working families, not wealthy money managers.”
Baldwin filed her proposal as part of a vote-a-rama Democratic blitz of amendments to Trump’s sprawling domestic policy agenda, which Democrats vehemently oppose. The hourslong process is the last hurdle before a final vote on passage in what has been an otherwise messy and drawn-out process for the Senate to pass the filibuster-skirting legislation and send it back to the House.
Trump has long pushed to change the treatment of carried interest, something that private equity is vociferously opposed to.
But the Senate version of Trump’s bill does not end the carried interest “loophole,” as critics characterize it. Carried interest is a type of income that some investment firms earn while managing investors’ money. It is taxed at the rates on investment income, but critics say it should be taxed at the higher rates that apply to labor income.
Opponents of carried interest, including Trump, argue that maintaining the current treatment of carried interest disproportionately benefits the wealthy and does little for middle-class taxpayers. And Democrats like Baldwin say closing the “loophole” would produce more tax revenue to chip away at the deficit.
Supporters of the status quo, however, contend that hiking taxes on carried interest would be arbitrary, could slow economic growth, and could deprive businesses of a source of investment.
Drew Maloney, president of the American Investment Council, said earlier this year that private equity and private credit industries invest some $700 billion every year into the economy and that 12 million workers are employed by private equity-backed companies.
Baldwin’s amendment could put Republicans in a tough political spot and garner bipartisan support, including from Sen. Josh Hawley (R-MO), if it receives a vote. Not all amendments proposed during the so-called vote-a-rama are put to a roll-call vote. Her amendment is to attach her Carried Interest Fairness Act, a measure she’s tried to pass into law for the past decade.
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Hawley, a populist, told the Washington Examiner that Trump has repeatedly brought up the issue of carried interest in private conversations. But Hawley acknowledged likely resistance from other Republicans to alter how carried interest is treated.
“This is the broader problem where we’re giving away hundreds of billions of dollars in special tax treatment to corporations and so forth, paying for it by cutting the Medicaid hospital fund,” Hawley said. “This is very bad.”