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Both Trump and President Biden have expressed intentions to close the carried interest loophole, yet the provision has endured due in part to strong lobbying from the private equity sector. Previous tax cuts did attempt to mitigate the advantages of the loophole by extending the holding period for assets from one year to three, but significant protections remain.
The Congressional Budget Office (CBO) and McKinsey have estimated that closing this loophole could generate between $1.2 billion and $1.4 billion annually. While these numbers reflect a notable influx to federal revenue, they are dwarfed by broader fiscal challenges, such as Trump's plan to exempt tips from income tax, which presents a significantly higher price tag.