Carried interest

As Trump surrounds himself with wealthy wall-street types the question arises will they promote their own friends or will they follow instructions from the President. Here is a quick test. If they get rid of carried interest, they will be Trumpers and if not he should replace them. My guess is that this as already been decided and they would not have received the appointments if they did not agree to get rid of this type of capital gain. Keep in mind that this is mostly for show since what this tax would bring in represents about 0.04% of tax revenues. In case you have forgotten carried interest which has been around forever allows certain profits of limited partnerships to be taxed as capital gain, 23% instead of ordinary income tax at 43%. If Trump would get rid of the capital gains tax then people like Warren Buffet would pay a lot higher rate that their secretaries, but don’t hold your breath on that change. Recall that a limited partnership is where one group puts up the money and another group manages the money. They buy businesses that they judge not to be operating properly and then make changes and then sell those businesses and share the profits. Normally 80% goes to the investors and 20% to the managers. If this time between buying and selling exceeds one year the profits are taxed as long term capital gains. Now the managers get a fee of 2% that is taxed as ordinary income tax but the 20% they get is taxed at the capital gain rate and this is called carried interest. It is this 20% that some say should also be taxed as ordinary income since many feel that this is also a management fee.