Congress is currently in negotiations with President Trump regarding the renewal of the landmark Tax Cuts and Jobs Act passed during his first term, which drove an explosive influx of investments that helped create jobs at countless small- and medium-sized businesses across the nation. To ensure the new Tax Cuts and Jobs Act has the same positive result for our economy, Congress must not lose sight of what made it work so well the first time around: a focus on conservative Republican principles including lower taxes and smaller government.
Unfortunately, some Republicans – operating under the mistaken belief that they are embracing populism – appear to be considering changes to the tax code that are normally aligned with radical liberals like Bernie Sanders and Elizabeth Warren, including undermining decades of tax policy surrounding carried interest.
Our nation’s current approach to carried interest – taxing it as capital gains – has been policy for a century because it plays a vital role in encouraging reinvestment, incentivizing private equity fund managers to look at long-term investment potential instead of focusing on short-term gains. The original Tax Cuts and Jobs Act recognized this, and in the wake of the bill’s passage billions were invested by private equity, with 85% going to small businesses.
This funding plays an important role in helping small businesses make the investments they need to grow and thrive, and it is also vital to businesses that are undergoing challenges and need funding to get back on the right track. In the state of Missouri, private equity investments support 299 businesses and 221,000 jobs.
If we give in to the left and let them fill the new Tax Cuts and Jobs Act with tax increases in the name of populism, it threatens to destroy our Party’s anti-tax brand. And if the treatment of carried interest changes, it threatens to stifle investment and do significant damage to the economy.
Instead of trying to reinvent the wheel with the new Tax Cuts and Jobs Act, leaders in Congress should embrace what worked the first time: emphasizing the pro-growth, low-tax Republican principles that have made the Republican Party the party of job creation.
