Senate Democrats have overcome obstacle after obstacle in their push to pass a reconciliation package, and this week they’re close to the finish. Unless a final something — or someone — stands in their way.
The carried interest loophole is essentially a way for fund managers to make a lot of money and pay the government very little back because the share of the fund’s profits they receive for their work is taxed at a top rate of just under 24 percent — dramatically less than the 37 percent top rate for ordinary income. This giveaway is so valuable that many have it to thank for the bulk of their fortunes. The Wall Street Journal reported last week that Blackstone Inc. Chief Executive Stephen Schwarzman received somewhere around $150 million in carried interest compensation last year; two other executives at the company received close to $92 million and $77 million. There’s simply no excuse for any lawmaker who purports to care about economic justice or equality to oppose eliminating the carried interest loophole.
Yet all the same, Congress — many of whose members benefit from the donations of the deep-pocketed — could allow this scandal to persist, especially if Ms. Sinema demands it. She shouldn’t. Republicans have been making hay in recent days of an analysis by the nonpartisan Joint Committee on Taxation, claiming that the reconciliation would raise rates on those earning less than $400,000 per year, contrary to President Biden’s pledges. This is mostly meaningless. The theory that some of the new 15 percent minimum tax on corporations would be passed on to employees and to shareholders doesn’t change the reality that the bulk of the burden would fall on the richest and the bulk of the benefit would redound to those worse off: whether it comes as help affording medicine or health care or as an investment in slowing global warming.
Ms. Sinema shouldn’t sink this bill, most of whose contents she has indicated in the past that she supports. And she shouldn’t sink it because she opposes closing the carried interest loophole. That provision unambiguously aids those who need help most, at the expense only of those who need it not at all.