Grassroots Collaborative in conjunction with Hedge Clippers released a new report, “Illinois Billionaires and Their Lucrative Loophole: How Illinois Can Raise Billions by Taxing Carried Interest” which examines the hedge fund and private equity managers profiting off of the carried interest tax loophole at the expense of the rest of taxpayers.
“The carried interest loophole allows equity firms and other members of the wealthy elite to lower their federal tax rates below those paid by many working Americans. By using an archaic holdover in the tax code from the days of sailing ships, money managers classify ‘fees’ from investing other people’s money as ‘carried interest’ to get a tax rate lower than that paid by teachers or childcare providers,” explained Abbie Illenberger, acting Executive Director of Grassroots Collaborative.
The report highlights the small set of high net worth individuals benefiting from the loophole, including: Ken Griffin, Michael Sacks, Bruce Rauner, Sam Zell, John Canning, Jr., Donald Wilson, and Dmitry Balyasny; all of whom have made significant political donations on the state and local level.
Representative Welch (D-Hillside) is the sponsor of legislation in the Illinois House that would recover revenue being lost due to the loophole.
“Our state desperately needs new revenue. As the Chair of the Higher Education Committee, I see how painful and devastating the budget impasse and lack of funding are to our students. I introduced HB 3393, a bill which will place a “privilege tax” on a small group of very wealthy money managers because the carried interest loophole is unjust and unfair. HB 3393 would generate at least $473 million each year in new revenue for the state according to conservative estimates. That’s a half a billion dollars in revenue our state needs,” stated Representative Welch.
“This report shows just how much this loophole is costing us,” added State Senator Daniel Biss (D-Evanston) chief Senate sponsor of the measure. “Hedge fund billionaires have rigged the federal tax system in their favor with the corrupt carried interest loophole. Since the Trump administration and Republican Congress aren’t willing to solve this problem, it’s time for us to fix it on the state level. Instead of taking advantage of a tilted playing field, these billionaires should be contributing their share to make our state government work.”