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  • 10.09.16

What is carried interest? Tax policy issue features prominently in 2nd Trump-Clinton debate 

At the second presidential debate, Donald Trump deflected a question about his leaked 1995 tax returns, which showed a $916 million loss that would have allowed him to avoid paying personal federal taxes for years, by saying that many of Clinton’s supporters use the same loophole to avoid paying taxes.

The loophole he was referring to, called carried interest, allows managers of private equity, real estate, and other funds to tax their fees—typically a percentage of the fund’s gains—as capital gains for tax purposes rather than income, which is taxed at a higher rate.

Asked why she did not close the loophole when she was a New York senator, Clinton said, “Because I was senator with a Republican president. I will be the president who will get it done.”

Here’s a good explainer on carried interest from the Tax Policy Center.

SK