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In an op-ed in the New York Times, a former treasury secretary slams Democrats who don’t want to close the loophole for wealthy investors

Larry Summers asked why money managers “should pay taxes at half the rate of others” and appeared to swipe at Sen. Kyrsten Sinema.



Summers slammed the Democratic Party for considering keeping a tax break for wealthy investors.

He also seemed to be taking a shot at Sinema, who has received a lot of money from the financial sector.

Summers isn’t the only one who thinks the Democrats should have stuck with the measure; some wealthy investors have also voiced their disapproval.

The Inflation Reduction Act, a $740 billion climate and spending package that rose from the ashes of President Joe Biden’s nearly dead agenda, is still riding high with Senate Democrats.

On the Senate floor, however, a major change was made to the package when Senator Kyrsten Sinema, a critical moderate in the Democrats’ narrow majority, voted to remove a tax provision that would have applied to high-net-worth investors.

Once upon a time, the Inflation Reduction Act was going to further close a tax loophole for carried interest. Private equity investors are among those who receive a portion of their returns on investment in the form of assets. A lower, more favorable capital gains tax is applied to these assets. Even former President Trump backed a narrowing of the loophole. His 2017 tax law mandated a three-year holding period for some investors before selling, but the IRA would have increased that to five years.

As Democrats were finishing up their sweeping climate and tax legislation, Sinema gave hedge fund managers and investors two major wins. She was successful in thwarting Democratic efforts to eliminate the carried interest loophole. Then she negotiated a reduction of the corporate minimum tax from 15% to 0% for many companies in the private equity industry.

“I don’t get the logic behind the claim that people whose livelihood is based on investing other people’s money should only be subject to a 50% tax rate. That just seems wrong to me “Ex-Treasury Secretary and well-known inflation hawk Larry Summers told Insider. Examining the patterns of campaign contributions made by the major actors protecting this loophole and the efforts made to preserve this tax break should convince anyone that this is not motivated by merit.

This appears to be a dig at Sinema. According to data from nonpartisan campaign finance tracker OpenSecrets, individuals and organizations in the securities and investment industry have donated $2.2 million to the Arizona Democrat since 2017.

Previously, a Sinema spokesperson told Insider that the Arizona Democrat actively sought reforms to better safeguard the state’s small businesses. A spokesperson for Sinema stated, “She has been clear and consistent for over a year that she will only support tax reforms and revenue options that support Arizona’s economic growth and competitiveness.”

Summers isn’t the only one who thinks the Democrats should have stuck with the measure; some wealthy investors have also voiced their disapproval.

Congratulations to the pro-education (P/E) lobby! Former Goldman Sachs CEO Lloyd Blankfein posted on Twitter. “Even after all of these years and budget crises, the top earners are still subject to a lower capital gains tax rate on their hard-earned money. It’s true that they contribute to economic growth through their actions, but so do truck drivers, teachers, and construction workers.”