Collins to Hold Tax Reform Hostage over Carried Interest?

Multiple sources on Capitol Hill report that Maine Sen. Susan Collins will push today to eliminate the “carried interest” provision of the tax code.

A Bloomberg report confirms her plans:

Collins also said she’ll pursue an amendment to enhance the child tax credit — and pay for the revenue cost by ending the “carried interest” tax break that favors investment managers. Carried interest is the portion of an investment fund’s profit — usually 20 percent — that’s paid to investment managers. Currently, it’s taxed as capital gains, meaning it qualifies for a tax rate as low as 23.8 percent. The top individual tax rate is currently 39.6 percent.

The Senate bill would address carried interest by requiring that only gains on assets held more than three years — up from one year — would qualify for the break. Collins called that provision “modest.”

The Collins measure would essentially amount to a significant tax increase on capital gains.

As Robert Graham writes in the American Spectator this week:

For some, closing carried interest appears to be a quick fix and helps to balance cells on the spreadsheet. For fiscal and tax experts, closing carried interest will limit economic expansion, reduce incentive for investments, damage the financial services industry, and threaten jobs within our nation. 

Collins should not hold tax reform hostage for the sake of this anti-investment provision. And if she does, other Republicans should stand strong and oppose her efforts.

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