(New York Post) -- The Trump administration is seriously considering an effective tax-rate hike on most hedge funds and some accounting firms as part of a broader overhaul of the US tax system, the Treasury secretary said Tuesday.
Hedgies typically have their income taxed at a lower “carried interest” rate of roughly 24 percent, since it’s considered a share of the company’s profits, compared with as much as 39.6 percent for ordinary income.
President Trump has said that they should be taxed at a higher rate.
“The president has been very clear that for hedge funds, they will not have the benefit of carried interest,” said Mnuchin, speaking at a New York financial conference.
Mnuchin said the administration wants to make sure that any changes to how hedge funds are taxed do not also negatively affect other job-creating industries.
“One of the things that we are working on is, as it relates to other entities that do create jobs, whether it’s in different sectors, we want to make sure that we encourage jobs,” Mnuchin said.
But when it came to hedge funds being taxed more, Mnuchin was clear.
“I know this issue is incredibly important to everybody in this room,” the 54-year-old former Goldman Sachs executive said to an audience of hedge fund pros and other finance types. “It’s less important to the American public and creating jobs.”
Mnuchin added that services firms, especially accounting companies, will no longer enjoy the benefits of a pass-through rate and will also have to pay a higher income tax rate.
The Treasury boss, who along with White House economic adviser Gary Cohn is charged with shepherding a corporate tax reform plan through Congress, has been coy until recently about the details of how the Trump administration will lower taxes.
At the conference, Mnuchin said Trump’s goal of lowering corporate taxes to 15 percent may not be achievable — but that they would be cut as low as possible to make the US more competitive.