Investment groups oppose Trump's carried-interest tax hike plan

NEW YORK (Reuters) -Private investment industry groups on Friday opposed U.S. President Donald Trump's plan to close a loophole that allows private equity and hedge fund financiers to pay a lower capital gains tax rate on much of their income.

"We encourage the Trump administration and Congress to keep this sound tax policy in place and unleash more long-term investment that supports jobs, workers, small businesses, and local communities," American Investment Council President Drew Maloney said.

White House press secretary Karoline Leavitt told reporters on Thursday that Trump had laid out his tax priorities, including closing the so-called carried interest tax loophole. It could help offset planned tax cuts in other areas, such as on overtime and tips.

In 2021, the Congressional Budget Office estimated that closing the loophole would raise tax revenue by $14 billion over 10 years.

A change in the tax rule, which would affect the compensation of private fund managers, has been discussed for more than a decade.

Fund managers have part of their compensation tied to the fund's profit. It is taxed as a long-term capital gain, which is lower than the income tax rate.

"Carried interest encourages smart, high-risk investments in innovative high-growth startups," the National Venture Capital Association said, adding the current system has boosted technologies such as artificial intelligence and cryptocurrency. "A change now will disrupt that progress and disproportionately harm small investors."

Maloney said since Trump's 2017 tax overhaul, the private equity industry has invested more than $5.6 trillion in the U.S. economy and supported 36,000 small businesses.

(Reporting by Carolina Mandl, in New York; Editing by Kirsten Donovan and Rod Nickel)

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