Remember that bipartisan disdain for the carried interest loophole? Don’t count on its demise anytime soon. GOP lawmakers are willing to discuss it as part of broader tax reform, but it will not be a part of budget negotiations in advance of the October 1 government shut down-deadline.
Democratic Senators want Treasury to set its private equity fee rule. In their letter to the department, Senators Elizabeth Warren of Massachusetts, Al Franken of Minnesota, Tammy Baldwin of Wisconsin and Sheldon Whitehouse of Rhode Island ask for finalization and enforcement. Under the rule, private equity firms would have a harder time converting fees into carried interest. Fees are considered to be compensation and thus taxed at a higher rate than carried interest, which is taxed at the capital gains rate. The difference between the rates can be as much as 19.6 percentage points. Treasury proposed the new rule in July. Comments are due by October 21.
Are Californians going to make some tax hikes permanent? Temporary tax increases enacted three years ago by Proposition 30 under Democratic Governor Jerry Brown are set to expire in 2018. Governor Brown is fine with that end date, since he wanted temporary increases to address California’s budget deficit. The state faces no current deficit, so should the tax hikes be permanent? One petition campaign says yes, and would put the “Invest in California’s Children Act” on the state’s November 2016 ballot. The act would make Prop 30’s higher income taxes permanent, set higher tax rates for households earning more than $2 million a year, and raise as much as $10 billion a year to fund K-12 schools, community colleges, early childhood programs, and Medi-Cal.
The United Kingdom faces its highest August budget deficit since 2012. Revenue fell 0.6 percent while spending climbed 1.6 percent, outpacing revenue by $18.7 billion. UK finance minister George Osborne wants to cut the nation’s deficit to 3.7 percent of gross domestic product this fiscal year and achieve a budget surplus by 2020. It’s not clear he’ll reach his goals.
Interested in subscribing to the Daily Deduction, the Urban-Brookings Tax Policy Center summary of the day’s tax news? Sign-up here to get the Daily Deduction delivered to your inbox every morning. If you’d like to tell us about a new research paper or have any comments about our feature, write us at dailydeduction “at” taxpolicycenter “dot” org.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
- © Urban Institute, Brookings Institution, and individual authors, 2016.