By Eliot Brown

It's a new presidential administration-and a new attempt is underfoot to go after carried interest taxes, the preferential tax rate that benefits venture capital, private equity and hedge-fund managers.

On Thursday, President Trump's press secretary told reporters the president wants to change the tax treatment of carried interest as part of Republicans' broader budget plans.

While the message was light on specifics, it rings familiar.

Typical private-equity fund managers get a large chunk of their pay from carried interest-essentially, an outsize chunk of the profits from a fund's investments. This pay is treated as an investment and taxed at the long-term capital gains rate of 20%.

Democrats and many Republicans have long argued it should be taxed at the income tax rate - currently 37% for the highest payers.

The past three presidents-including Trump-over the last 17 years have all tried to go after this disparity and raise the rate.

All have failed.

Carried interest's ability to survive the constant bipartisan barrage has made it something of a fascination in Washington-a testament to the outsize political strength of the relatively tiny fund-management industry, which says the current structure keeps fund-managers' interests aligned with investors.

Democrats in Congress came close to eliminating the tax rate in 2022, but their plan was dropped after objections from centrist Sen. Kyrsten Sinema (D., Ariz.).

It was estimated at the time that eliminating the tax would bring in $14 billion in government revenue over a decade.

Any changes would largely just affect firms' executives and private partnerships-not the public shareholders of big private-equity firms such as Blackstone and KKR. That's because those publicly-traded firms are structured as C corporations-so the shareholders aren't benefitting from the preferential tax rate.

This item is part of a Wall Street Journal live coverage event. The full stream can be found by searching P/WSJL (WSJ Live Coverage).

(END) Dow Jones Newswires

February 07, 2025 06:16 ET (11:16 GMT)

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