President Donald Trump's top economic advisor said Thursday the administration remains committed to killing a tax perk that would hit certain corners of Wall Street in the pocketbook, even though it wasn't mentioned in the GOP tax plan.
"The president remains committed to ending the carried interest deduction," Gary Cohn, director of the National Economic Council, said on CNBC.
Carried interest is the profit hedge funds, private equity funds and other investment managers make for managing investments. Usually they charge 20 percent of gains in their funds in any given year on top of a 2 percent annual management fee they get regardless of performance. According to Institutional Investor's Alpha magazine, the top 25 hedge funds made $11 billion in profit last year.
For investments held for more than one year, profit is taxed at the lower capital gains rate of 23.8 percent, not the ordinary income rate of 39.6 percent. Profitable investments held less than one year are short-term gains taxed as ordinary income. And here's the trick: Hedge funds dodge in and out of investments and, unlike private equity funds, typically don't take controlling stakes and don't hold investments for years.