The controversial carried interest loophole is a tax provision allowing private equity and hedge fund managers to pay capital gains rates on what is effectively labor income. There have been many attempts to remove it. When Senate Majority Leader Chuck Schumer and Senator Joe Manchin struck a surprise deal in late July 2022 on the Inflation Reduction Act, the bill included a provision to close the loophole, raising an estimated $14 billion over a decade. The private equity industry then mobilized a massive lobbying campaign with its attention focused on Senator Kyrsten Sinema of Arizona. Sinema was opposed to corporate tax increases and had received nearly $1 million in contributions from private equity, hedge fund, and venture capital interests over the prior year alone. Sinema announced she would only support the bill if the carried interest provision was removed, and Schumer, who needed every Democratic vote to pass the bill through reconciliation, had no choice but to comply. She also secured a separate $35 billion exemption for private equity from the bill’s new corporate minimum tax. The IRA passed 51–50 on August 7, 2022 without the carried interest reform.

Inspiration: Flèches and La Gerbe