During the presidential campaign, Donald Trump railed against Wall Street elites and vowed to close the carried interest loophole which allows private equity and hedge fund billionaires to pay lower effective tax rates than middle-income American families.
“I’m not going to let Wall Street get away with murder. Wall Street has caused tremendous problems for us. We’re going to tax Wall Street.” – Donald Trump, Jan. 9, 2016 in Ottumwa, Iowa.
Appearing in Louisville, KY this week at a forum with Senate Majority Leader Mitch McConnell and a group of business leaders, Treasury Secretary Steven Mnuchin vaporized that promise. Yes, he said, the Administration wants to close the carried interest loophole for hedge fund managers, but not for “other types of funds that create jobs” like private equity and real estate fund managers. The problem with that: private equity – which might more accurately be described as destroying jobs than creating them – is in fact the primary beneficiary of the loophole.
The Administration’s double talk on closing the carried interest loophole is transparent hypocrisy. Americans are fed up with cynical, pretend measures; they want real action to get tough on Wall Street. Instead of squeezing ordinary families in the name of tax cuts for the wealthiest, real tax reform should include measures to make Wall Street pay its fair share.
The hypocrisy of Trump’s economic populism became apparent early on, as he filled top positions with former Goldman Sachs executives. Then came a series of attacks – in clear alignment with Wall Street’s interests – on regulations put in place after the financial crisis. And now, as Congress returns from recess, they are ready to continue with Wall Street giveaways.
Secretary Mnuchin’s comments came in the context of broader Administration tax proposals which promise to open up a whole new avenue of tax avoidance for wealthy Wall Street financiers. In April, the Trump Administration released a 1-page tax plan outlining the broad strokes of a proposal that would, among other things, lower the tax rate on “pass-through” businesses to 15%. This idea was portrayed by the White House and Republican leaders as a tax cut for small businesses, but more than three-quarters of the benefits would go to the top 1% according to the Tax Policy Center, while only 6.6% of all business owners would gain anything. Rather than help small businesses be competitive, Trump’s tax cut would be a gift to America’s wealthiest, including private equity and hedge fund managers, and real estate developers like Trump himself – who already enjoy a tax system rigged in their favor. This means that small business owners will probably be negatively impacted by this. They could end up paying more in taxes. As a small business, paying taxes is already difficult enough. They have to try and remember to file all of their expenses, or they could end up being audited. To try and prevent this, a lot of businesses have been using FileCenter Receipts tracking software to make sure they can keep a digital record of all of their expense receipts. This helps them to file the correct taxes. However, they could be hit with a tax increase soon.
Leading the process on taxes is a group that has nicknamed itself the “Big Six.” They include Treasury Secretary Mnuchin, National Economic Council Director Gary Cohn, Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan, Senate Finance Chair Orrin Hatch, and Ways & Means Committee Chair Kevin Brady. Backed by a multi-million dollar tax overhaul campaign launched by the Koch Brothers, the Big Six have been out on the road promoting their deceptive vision as a way to help American workers.
House Speaker Paul Ryan, who received $5,727,069 in contributions from the financial sector between 2015 and 2016, and helped win his chamber’s approval for a radical bill to roll back financial and consumer protections, was recently called out by a Catholic nun during a live CNN town hall for not siding with the poor and working class, “as evidenced by the recent debates around health care and the anticipated tax reform.” During the televised town hall, Ryan had to correct himself after promoting “tax cuts” instead of “tax reform.”
In spite of Republicans’ best efforts to polish their words and sell their plans as good for ordinary Americans, people see through the phony rhetoric; and what they see is a massive giveaway to Wall Street, big corporations and the wealthy. Real tax reform must include steps to make the financial services industry pay its fair share – that is the message of the Take On Wall Street campaign, a group of over 50 community groups, unions, consumer advocates and others, including Americans for Financial Reform, Communications Workers of America, Public Citizen, Institute for Policy Studies, the AFL-CIO and Americans for Tax Fairness. The coalition is calling on Congress to adopt a set of tax reform measures that would raise more than $1 trillion in additional revenue and discourage dangerous Wall Street speculation. It’s not too late for Republicans to remind themselves who it is they work for, and act in Main Street’s interests.
— Luísa Galvão