NATIONAL HARBOR, Md. — Grover Norquist, one of the prime architects of conservative tax policy in the U.S., signaled he is open to killing the so-called “carried interest” tax loophole in an interview with Business Insider Friday.
“I’m insufficiently focused on that as a specific thing,” Norquist, the founder and president of the powerful Americans for Tax Reform, said when we asked about carried interest at the Conservative Political Action Conference. “I would object to changing it standalone — because then it’s just a tax increase — or as part of a net tax increase. But as part of a revenue-neutral tax proposal, it’s less problematic.”
The carried-interest loophole is a benefit in the tax code that allows certain hedge fund and private equity profits to be taxed at a lower rate. Norquist supported the tax reform proposal offered by Republican House Ways and Means Committee Chairman Rep. Dave Camp last week, which was revenue neutral and included a plan to eliminate carried interest. However, Camp’s plan was opposed by members of Congress from both parties and has little chance of becoming law.
The elimination of carried interest was one of the only elements Camp’s proposal shared with the budget President Barack Obama budget released Tuesday. When Camp’s plan was first announced, it sparked rumours of a “revolt” on Wall Street with financial industry donors abandoning Republicans as a result of Camp’s proposal.
Norquist’s organisation is famous for sponsoring the “Taxpayer Protection Pledge,” which has been signed by all but 13 sitting congressional Republicans. The pledge serves as a promise, in writing, that candidates will oppose all tax increases while in office. Norquist suggested killing the carried-interest loophole wouldn’t force lawmakers to break the pledge.
“It might be something we’d still oppose” after further study, he told Business Insider, “but it’s not a violation of the pledge.”
Norquist described Camp’s plan as a good start to a larger discussion on tax reform. He said the proposal helped draw contrast between Republicans who propose revenue-neutral tax code simplification and Democrats that back standalone tax increases.
Norquist said Camp’s plan was also important because it also included a dynamic — not static — estimate from the Joint Committee on Taxation, something with the potential to alter how tax-reform legislation is scored in the future.
“Dynamic scoring” assumes any changes individuals and businesses pursue in response to a change in tax policy could significantly affect economic growth.
“That’s a huge win. Huge, huge win,” Norquist said. “That’s why I think the bill is great — it’s not a tax increase, it’s scored dynamically. And it’s not going anywhere, but it serves as a discussion point — because Democrats won’t pass anything that’s not a tax increase.”
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