There’s bad news for #NeverTrump Gov. Bruce Rauner and his Wall Street pals.
Last week on CBS’ Face the Nation, President Trump again promised to end the carried interest loophole. He made eliminating the loophole a cornerstone of his campaign.”They’re [fund managers] paying nothing and it’s ridiculous. I want to save the middle class,” Trump said in 2015. “The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.”
Presidential advisor Steve Bannon has also made eliminating the carried interest loophole a priority as accidentally revealed in a photo of his whiteboard last month.
It’s the real reason why liberal Gov. Rauner despises Pres. Trump, why he didn’t support him after he won the GOP nomination, and it’s why he still refuses to say Trump’s name. It’s also why Wall Street supported Hillary Clinton and attacked Trump. The Deep State is still trying to defeat him.
Rauner dodges millions in taxes by using the carried interest loophole. Rauner’s business partners at, GTCR, which manages over $30 million in Illinois’ pension funds, skirt taxes by using the loophole too.
As Governor, Rauner appoints trustees who oversee Illinois’ pensions decisions. In 2014, he promised he would set up “blind trust procedures” to shield himself from these blatant conflicts of interests.
That’s not what Rauner did. He broke his promise. Instead of setting up a blind trust, he gave Roundtable Investment Partners exclusive power of attorney. Rauner is also an investor in Roundtable Investment Partners.
Illinois’ pension funds hit $119 billion in unfunded liabilities in fiscal 2015. GTCR also manages other state government pension funds across the U.S. Most of those pension funds are underwater too.
Real GOP Illinois’ team did a review of Rauner’s tax returns and here’s what we found:
According to his 2015 return, Rauner took the lower tax rate (capital gains tax loophole) on his federal taxes. His Illinois tax was 3.75% of the gross line of $188 million which is what he paid — $7 million. On his federal taxes, he paid $36.7 million on income of $176.7 million but then he had to pay an additional $6.6 million of Net Investment Income Tax (NIIT) for a total of $43.3 million in federal taxes. Think of the NIIT as like a tax on investment income above and beyond the capital gains rate.
If the majority of his capital gains of $169.5 million are from carried Interest, he’s paying a tax rate of 20% or $33.9 million.
If Rauner was taxed at the top rate of 39%, he would be paying $66 million in federal taxes. Therefore, if these figures are correct, Rauner’s tax dodge could be up to $66 million – $33.9 Million or $32 million for 2015 alone.
Of course there’s no way to really know the rest of the story because Rauner doesn’t release the schedules that go with his tax return that tell the true story.
Rauner has been using the carried interest loophole for years.
According to NBC5:
From 2010-2012, Rauner owed a collective $20.7 million in taxes while reporting income of $108 million over that time period — that put him roughly in the same tax bracket as Democratic Gov. Pat Quinn, whose rate during those several years averaged at 18.8 percent. Rauner, meanwhile, clocked in at above 19 percent.
Rauner also dodged Social Security and Medicare payments.
The carried interest rule allows financial managers at private equity, hedge fund and other firms to use a valuable tax loophole. They pay federal taxes using a lower capital gains tax rate on their income a instead of at the higher rate that you and I pay on earned income from our labor.
Naked Capitalism explained it this way:
The carried interest loophole allows fund managers, who typically have only a 1% to 3% investment in the funds they operate, to treat the prototypical 20% profit share as capital gains income, which is taxed at a lower rate than labor income.
This tax loophole has been worth millions to our current Governor but someone is paying the price for this government gift.
Cumulatively, between all hedge and venture capital funds there are hundreds of billions of dollars not paid to the federal government. This tax loophole isn’t available to the average guy. We don’t have an option to have our income taxed at a lower rate.
The above financial statements have not been verified by a certified public accountant. Real GOP Illinois welcomes questions and comments on this story.
Downstate contributed to this story.