one year. so while the $300,000 was taxed near 40% at the regular income rate, the $43 million was taxed at ding, ding, ding, 20%. how does this happen? there s one word. lobbyists. joining me now is congressman brad sherman. he s also a certified public accountant. so you can take issue with anything i described if you don t like it. let me ask you, you say lobbyists are to blame for this. the president said he was going to get rid of it in his campaign. republicans now want to get rid of it. yet, every year they lose out to lobbyists. how come? well, i think the lobbyists for the carried interest exclusion are pretty successful. but there s also a certain inertia here in washington. we haven t plugged a tax loophole in 10, 15 years. there s also a wing of the republican party that is an opposed to anything that
manager does a good job. so the rich guy s investment goes up by $5 million. that s a huge profit, right? well, the way it works is that the money manager gets a cut of that the profit. 20%. so in this case, his cut of the total profits is $1 million. now, the government wants to encourage people to invest in new businesses and private equity does that. so if you invest in new businesses via private equity, the government taxes your gain at a lower rate. 20%. the thing is, with this loophole, the money manager also gets to pay the lower rate on his cut of the profits. so he pays 20%. it s not his money he s putting at risk. it s other people s money. in this case, the rich investor. the bottom line, the money manager in this case would pay $200,000 in taxes. if he were paying the regular income rate since that he s paid to do every day, right, manage that money, he would be paying $400,000. that is a huge tax savings and means a bunch of billionaires
20%. the thing is, with this loophole, the money manager also gets to pay the lower rate on his cut of the profits. so he pays 20%. it s not his money he s putting at risk. it s other people s money. in this case, the rich investor. the bottom line, the money manager in this case would pay $200,000 in taxes. if he were paying the regular income rate since that he s paid to do every day, right, manage that money, he would be paying $400,000. that is a huge tax savings and means a bunch of billionaires pay half the amount in taxes as the rest of us. the one who s manage the money. guys like this guy. henry kravitz from kkr is worth $5 billion. his take home pay according to the wall street journal was $161.4 million. his actual salary was a me go area $300,000. in carried interest alone though, his cut of other people s money, 43g.3 million in
pay half the amount in taxes as the rest of us. specifically the billionaires that run the private equity firms. the one who s manage the money. guys like this guy. henry kravitz from kkr is worth $5 billion. his take home pay according to the wall street journal was $161.4 million. his actual salary was a meager $300,000. in carried interest alone though, his cut of other people s money, $43.3 million in one year. so while the $300,000 was taxed near 40% at the regular income rate, the $43 million was taxed at ding, ding, ding, 20%. how does this happen? there s one word. lobbyists. joining me now is congressman brad sherman. he sits on the house financial services committee. he s also a certified public accountant. so you can take issue with anything i described if you don t like it. let me ask you, you say lobbyists are to blame for this. the president said he was going to get rid of it in his
president obama is moments away from his big transportation infrastructure speech. we ll bring that to you when it happens. meanwhile, the new gop tax reform plan is falling flat. even members of his own party are not behind the proposal laid out by house ways and means committee chairman dave camp. it would cut the top income rate to 25%. now not everyone likes this but at least it is a proposal and someplace to start the discussion in washington and that is where we spin today. you guys, i think this proposal is a great one. there s a lot in it. it s not likely to go anywhere from here. this is how the washington post writes it up. they say it s a simpler code that lowers rates and collects roughly the same amount of money