Behind closed doors in the U.S. Congress, a key battle is underway over who will benefit from tax relief in the coming years. A new spending package backed by former President Donald Trump and his Republican allies includes a controversial provision: offering $10.7 billion in tax breaks to private credit funds.
However, this provision was removed from the Senate version of the bill – at least for now.
📉 Tax Relief for Funds, Cuts for Ordinary Americans?
Senator Elizabeth Warren has sharply criticized the proposal, accusing Trump’s team of prioritizing the wealthy over working Americans:
"This is what armies of lobbyists and endless political donations get you: massive tax breaks at the expense of healthcare, education, and food aid for American families. Private credit firms don’t need tax cuts – working people do."
The plan coincides with proposed cuts to Medicaid and SNAP (Supplemental Nutrition Assistance Program). Critics argue that low-income families would bear the brunt of the cost.
📊 Trump’s Bill Would Add Trillions to the National Debt
The Congressional Budget Office (CBO) warned that the proposed tax cuts would increase the U.S. national debt by $2.4 trillion by 2034, with little positive impact on economic growth.
Brandon DeBot from NYU's Tax Law Center summed it up: "This bill takes from the bottom and gives to the top."
🏦 BDC Funds Are Booming – And Want More
Private credit funds, or BDCs (business development companies), have seen a surge in popularity. In 2024 alone, they attracted nearly $44 billion in new capital, a 70% increase compared to last year. Their appeal? High yields and steady cash flows.
Advocates claim tax relief would unlock more capital and help BDCs achieve similar tax treatment to real estate investment trusts (REITs). They point to a precedent from 2017, when REITs won favorable treatment during corporate tax reform by arguing they were unfairly penalized as "pass-through" entities.
⚖️ Blocked in the Senate. But Is This the End?
Though the Senate Finance Committee dropped the provision, lobbying efforts are ongoing. Supporters are reportedly preparing a streamlined version of the proposal to increase its chances of passage.
Some Republicans argue that the tax cuts are needed to boost capital formation amid high interest rates. But opponents warn this is another move toward a tax system that favors the rich — at the expense of the rest of society.
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