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The Carried Interest Loophole Survives One other Political Battle

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“Carried interest has turn into the MacGuffin of the I.R.A. saga,” said James Lucier, an analyst at Capital Alpha Partners, a policy research firm in Washington, describing it as a literary device that authors include merely to make plots more interesting. “The MacGuffin distracted attention from the really necessary things occurring within the story to make the startling conclusion much more surprising ultimately.”

On Friday, some progressive policy experts shrugged off the elimination of the carried interest provision, which they considered only a modest improvement over current law.

“The proposal that was within the bill until last night made a technical adjustment within the holding period for assets that qualified for carried interest treatment,” said Jean Ross, a senior fellow on the Center for American Progress, a liberal research group in Washington. “A greater approach would tackle the difficulty head-on and say that compensation for services managing an investment fund ought to be taxed like work and subject to atypical tax rates.”

Ms. Ross added that she was pleased by the addition of the tax on stock buybacks, which some Democrats and their allies have long supported, arguing that firms are spending an excessive amount of money buying back their very own shares, quite than investing in research and development or giving staff raises.

Ms. Sinema herself has said little about why she considered it so necessary to preserve the carried interest tax treatment. She has said that she plans to work on laws with Senator Mark Warner, Democrat of Virginia, to handle the loophole. But when the laws shouldn’t be included in the present package, which is being fast-tracked under an arcane budget process, any reform would require support from at the least 10 Republicans.

“I feel we reached agreement that there are areas where there’s been abuse,” Mr. Warner said in an interview, adding, “I’m disillusioned it didn’t get on this bill, but I’m looking forward to working with Senator Sinema — and others — to see if we are able to address this.”

In a press release on Thursday, Ms. Sinema said, “We have now agreed to remove the carried interest tax provision, protect advanced manufacturing and boost our clean energy economy within the Senate’s budget reconciliation laws.”

Emily Cochrane contributed reporting.

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