Republicans’ first amendment to their tax reform bill would ease off a proposal to institute a new tax on large college endowments.
Almost six hours hours into the House Ways and Means Committee’s markup of the Tax Cuts and Jobs Act, Chairman Kevin Brady, R-Texas, offered an amendment that would limit “carried interest” for hedge funds, change the treatment of international profits and make other substantive alterations to the bill in addition to the endowment tax. The panel later passed it on a party-line vote.
Under the amendment, which Brady described as a package of “modest refinements,” the 1.4 percent excise tax on university endowments proposed in the bill would apply only to schools with endowments of at least $250,000 per student, up from $100,000.
The amendment also would limit carried interest to long-term investors, which President Trump has said he favors. Carried interest refers to income earned by investment managers that is taxed at the lower capital gains rate, rather than as labor income. The amendment would impose a three-year holding period, meaning that hedge funds that cycle through speculative investments wouldn’t qualify.
Also, Brady’s measure would change the rules set up to prevent companies from routing income through tax havens to lower their U.S. tax bills. It contains other provisions, too, such as ensuring that musicians’ sales of music are still treated as capital gains and issuing new rules regarding claiming low-income tax credits.
Democrats reacted with outrage to the introduction of the changes, which they said they hadn’t seen.
“You make a mockery out of this committee,” Rep. Sandy Levin, D-Mich., told Brady.
Levin accused Brady of recklessly changing the bill without regard to policy to make it more politically viable. “You’re determined to pass a bill because you haven’t done anything of importance all this year,” he said.
“I know this is the moment where outrage is supposed to occur in the process,” Brady responded.
Then, the markup briefly descended into partisanship as Levin asked for Brady’s comments to be stricken, and Republican Rep. Jason Smith of Missouri retaliated by asking for Levin’s remarks to be stricken.
