Former Treasury Secretary Larry Summers initially supported the major tax, climate change, and health care bill that passed the Senate on Sunday. But he has a quibble with two of the late changes to the bill that let wealthy hedge fund managers and venture capital partners avoid paying higher taxes.
The well-known American economist said there was no legitimate public policy argument for how the legislation ultimately protected the carried interest loophole that lets big investors pay lower income tax on their earnings than average people. Such investors currently pay the capital gains rate of around 20% on most of their earnings, compared with the up to 37% that average people pay on their income.
The legislation’s goal, originally, was to narrow the loophole to make it harder for private equity managers to pay taxes at a lower rate.
Summers also mentioned the amendment to the bill, added Sunday during the Senate’s 15-hour debate, that excluded subsidiaries of private equity firms from the 15% minimum tax on corporations with profits over $1 billion. Read more »