This week, Treasury Secretary Steven Mnuchin made an important statement about carried interest, capital gains, and the Trump administration’s vision for economic growth. Carried interest has been under attack by Democrats and would-be tax hikers for years, but Mnuchin emphasized that carried interest helps companies create jobs and move the economy forward:
“U.S. Treasury Secretary Steven Mnuchin said Monday that President Donald Trump may keep the carried interest tax break for firms that create jobs, while eliminating it for hedge fund managers.
“‘We will close the loophole for hedge funds in carried interest,’ Mnuchin said at an event in Louisville, Kentucky, where he appeared alongside Senate Majority Leader Mitch McConnell. ‘What we are focused on is there are many other types of funds that do create jobs and we want to make sure we don’t discourage investment.’”
This is an important signpost for the administration as Mnuchin, Trump, and other officials prepare to begin tax reform negotiations with Congress. Both sides have made it clear that they want to pass the first innovative tax reform package in decades in order to kickstart the economy and promote development. Preserving carried interest removes a potential tax increase from the outset and sets the right course for tax reform from the outset.
Mnuchin is right to embrace capital gains as part of the administration’s broader economic agenda. The Trump administration has made growth and job creation its top priority, and maintaining capital gains treatment for companies that help achieve that goal is paramount. Removing capital gains treatment for companies that put people to work would undercut an economy that has shown positive movement but still needs stronger underpinnings in order to fully thrive.
Importantly, Mnuchin has signaled that the administration won’t succumb to the tired political attacks on carried interest and capital gains we’ve been hearing for years. Chuck Schumer and Sherrod Brown have vilified these policies as well as the businesses they support, but those businesses are major drivers of growth. Mnuchin’s comments indicate that he recognizes the critical role that private equity, real state, and venture capital play in job creation.
Preserving carried interest will also be valuable as the Trump administration tackles another major policy initiative: infrastructure upgrades. Much of the Trump infrastructure agenda will undoubtedly be executed through public-private partnerships, which will likely be funded by entities that benefit from carried interest treatment. The more money available to these investors, the stronger investment they will make in America’s infrastructure.
Secretary Mnuchin should be applauded for standing up to the relentless political attacks from liberals who are more interested in raising taxes than growing the economy. Mnuchin’s approach signals everything is on the table inside the administration when it comes to job creation – as it should be.