by Reggie Oldak, Senior Counsel,
National Women's Law Center
We told you before Memorial Day that Congress was taking aim at a major tax loophole that allows extremely wealthy investment managers to pay lower taxes than teachers, nurses, and other hard-working Americans. They’ve lowered their sights, but we’re still working for a strong bill that will meet the urgent needs of unemployed women and men, and shrink tax preferences for the very rich and corporations.
The House voted in December 2009 to eliminate the "carried interest" loophole, taxing investment fund managers on their compensation at the same ordinary income tax rates that everyone else pays—up to 35 percent instead of the 15 percent rate for capital gains. A compromise provision in the American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213) passed by the House on May 28 would partially close the loophole: ordinary income tax rates would apply to 75 percent of earnings, and 25 percent would still be taxed at the lower capital gains rate. While there’s no tax policy reason to prefer one group of earners over another, especially in a bill so ambitiously titled, this compromise also had been endorsed by Senate Finance Chair Max Baucus (D-MT). After three occasions on which the House had passed a bill closing the loophole, only to see it die in the Senate, the prospect of getting three-quarters of a loaf out of the Senate made us giddy.