President Trump has urged Republican lawmakers to eliminate the carried interest tax break, which allows private equity and venture capital managers to pay a lower tax rate on certain earnings. This move could significantly affect the VC industry, as highlighted by Bobby Franklin, the President of the NVCA. He noted that removing the carried interest loophole might hinder investment in high-growth startups and technology sectors. The 2017 Tax Cuts and Jobs Act did not eliminate this loophole but modified the capital gains holding period, which was acceptable to the industry. Most VC funds are heavily concentrated in New York and Silicon Valley.
Carried interest encourages smart, high-risk investments in innovative high-growth startups, but its removal could disrupt progress and harm small investors, particularly in middle America.
The 2017 Trump tax legislation kept venture investment flowing to emerging technologies like AI, crypto, life sciences, and national defense, indicating the importance of such breaks.
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