When Republicans passed Donald Trump’s “big, beautiful” tax bill on Thursday, they included provisions to partially offset the costs, including significant cuts to Medicaid and food stamps. One area lawmakers didn’t touch: the so-called carried interest loophole that offers beneficial tax treatment to wealthy private equity, venture capital and hedge fund managers.
The carried interest loophole refers to a provision in the U.S. tax code that allows investment fund managers, like private equity executives, to pay a lower tax rate than normal, everyday workers. Private equity firms typically raise outside capital from investors like pension funds, insurance companies and high net worth individuals. They use this money, called the fund, to invest in companies, frequently taking control of these businesses. PE executives usually receive a share of the profits—the carry—for managing investments.
