Private equity under spotlight as Trump revives carried interest debate

Private equity is once again at the center of U.S. tax discussions, as President Donald Trump renews efforts to eliminate the carried interest tax provision.

This policy, which has helped drive long-term investment and job creation, allows private equity and hedge fund earnings to be taxed at capital gains rates rather than as ordinary income.

Trump’s latest push comes as part of a broader tax reform agenda, which he discussed with Republican congressional leaders. The move follows a 2017 attempt that resulted in only a minor adjustment. Namely, it extended the required holding period for preferential tax treatment from one to three years. Despite this, the private equity industry has continued to play a critical role in supporting businesses, workers, and local economies through strategic investments.

Drew Maloney, president of the American Investment Council, highlighted the importance of maintaining the current policy. He stated that the 2017 changes struck the “right balance” to encourage long-term investment. Many industry leaders believe private equity-backed businesses will continue to be key drivers of economic growth, innovation, and job creation.

While Trump’s proposal has drawn bipartisan attention, with Democratic Senator Tammy Baldwin introducing a related bill, the private equity sector remains focused on sustaining the momentum of long-term capital deployment. The industry has already been navigating an evolving regulatory landscape, including potential changes to merger guidelines and debt deductibility rules.

As tax reform discussions progress, private equity firms and investors will continue to advocate for policies that promote economic expansion and financial stability. The debate over carried interest taxation underscores the broader conversation on how best to balance fiscal policy with investment-driven economic growth.

Source: Financial Times

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