Senate Minority Leader Chuck Schumer (D-NY) is a long-time friend of soon to be President Trump, even though Senator Schumer now denies the friendship. Just how good of friend will be determined soon.
Schumer is peddling a tax hike on the life blood of American business…capital gains. It is wrongly called the “Carried Interest Loophole” and Schumer is hoping to get his old friend Trump into a backroom deal to make it a reality.
Schumer has stated how he is looking to work with Trump on certain issues, and he thinks the carried interest tax hike is one of them.
Trump would do well to keep those meetings with Schumer out in the open. Any backroom meetings that end in compromising key issues capped off with a picture of Trump and Schumer smiling over a signed document are going to be devastating to Trumps credibility. People already worry that his willingness to make a deal may destroy the fierce loyalty of his followers.
Trump’s followers and most of the nation, are sick and tired of cronyism. The back-room deals, “you scratch my back, I’ll scratch yours,” has got to go. Will the swamp get drained or not? That is a question on the mind of many.
The carried interest tax hike will be a good place to watch.
Just what is the so called “carried interest loophole?”
Basically, it is a question over how to tax carried interest, which is the share of the profit from an investment that goes to the fund or investment manager. It is part of the larger debate between the left and right over capital gains treatment in general.
Economists on the right view taxes on capital gains as a double taxation because corporate taxes have already taken their bite. Also, taxing capital has a negative impact on the economy as investment is the lifeblood of the free market system and growth. Tax that and you stifle it. Investors will look elsewhere to use their capital.
The left doesn’t see it this way. They never met a tax they didn’t like, but they see this as a fairness issue. Capital income should be taxed like any other, however, they disregard that it has been taxed already. They also draw a distinction on each role in how money is made.
For example, one person with knowledge comes together with someone who has capital. The one with capital gives it to the one with knowledge. They prosper. Rather than letting the two prosperous partners be treated the same as they currently are. The part paid to the knowledgeable party is considered the “Carried Interest”. Schumer and his friends would like this taxed again as labor income, not as capital gain.
This is not a loophole, it’s how business gets done. People with money have financed so many great ventures throughout our history it is immeasurable. Seeking to tax the guy with the good idea and knowledge is more of a back-door way to increase taxes than a loophole.
Trump should take Schumer out to a fine New York dinner at a Trump owned restaurant. Feed him a good meal and kindly explain to him, that common ground may exist, but if it means raising taxes on the people who drive our economy, he can forget about it.
Trump was swept into the Presidency by people looking to see things change. Making a deal with a long-timer like Schumer will be an ominous signal that the swamp is not going to be drained at all. Just cleaned up on the edges and we will all be sold down the river.