Senate Republicans are getting ready to pass their tax bill any minute now—but not before tacking on one last gift for their donors.
University of San Diego law professor Victor Fleischer spotted the early Christmas present in a leaked list of the amendments Republicans are planning to include in the bill. It comes courtesy of Texas Senator John Cornyn. In essence, it lets the partners of giant private equity firms like Blackstone and Apollo Global Management, as well as a number of energy companies, take advantage of the bill’s big tax cut for pass-through businesses, which aren’t subject to the corporate rate.
There are a few things that make this giveaway particularly shameless. The passthrough cuts are specifically designed to exclude high-earning professionals in industries like law, accounting, and finance whose business “profits” are really just salary by another name. Cornyn works around this by only making firms organized as “publicly traded partnerships”—which is to say, partnerships you can go on eTrade and buy stock in. Most of these firms are in the energy industry, which obviously has a big presence in Texas, but they also include private equity behemoths like Blackstone. Other parts of Wall Street aren’t really going to reap the benefits of Cornyn’s amendment.
So I am sure you will be shocked to learn that Cornyn’s top political donors include publicly traded partnerships like Blackstone and Energy Transfer Equity. His amendment is a direct transfer of cash to some of the very particular corners of energy industry and finance that fill his campaign coffers.
Beyond all that, it’s worth recalling that private equity partners already pay grotesquely low taxes on their profits, thanks to the notorious carried interest loophole, which lets financiers pay taxes on their income at the low capital gains rate. You may recall that Trump at one point promised to eliminate the loophole, but the GOP’s bill more or less preserves it with some cosmetic changes that won’t effect private equity guys. Cornyn’s amendment, as Fleischer notes, will lower their tax rate on income that doesn’t already qualify as carried interest. It’s an additional, gratuitous carve-out for some of the Republican party’s favorite money men.