U.S. lawmakers are considering tax incentives for private credit investors. The budget draft proposed by President Trump, recently passed by the House, has promoted tax cuts worth billions of dollars aimed at private credit funds.
However, these provisions were removed in the Senate draft.
The initial provisions in the bill proposed a tax reduction on dividends received from business development companies (BDC); some lawmakers hope to add this proposal to the final version of the bill.
Senator Elizabeth Warren opposes tax incentives for private credit companies.
According to the Joint Committee on Taxation, tax incentives for private credit funds are expected to lead to a budget shortfall of $10.7 billion over the next 9 years. Nonetheless, lawmakers are still discussing, although many believe this proposal is unlikely to survive in the Senate.
Elizabeth Warren, a Democratic senator from Massachusetts, is one of the opponents of this tax incentive.
She criticized the Trump administration: 'This is the result of legions of lobbyists and an endless treasure of political money: massive tax incentives negatively affecting health care, education, and food assistance for American families. Private credit companies do not need tax incentives — workers are the ones in need.'
Many other lawmakers also expressed concerns about cuts related to Medicaid – the health insurance program for low-income individuals – and the Supplemental Nutrition Assistance Program (SNAP) for struggling families. They warned that these provisions could cause more harm than good for the people.
There are concerns that this bill will exacerbate the national public debt. The Congressional Budget Office (CBO) predicts that the bill could add $2.4 trillion to the U.S. public debt by 2034.
CBO assesses that the bill is unlikely to promote economic growth, a view shared by Brandon DeBot, policy director at NYU's Tax Law Center.
He emphasized that this bill only reduces support policies for low-income households, while providing strong tax incentives for high-income groups, especially private credit fund investors in BDC.
Additionally, some supporters of the bill explained that the tax incentive provisions aim to ensure fair treatment for BDC, similar to the classification of real estate investments like REITs.
In 2017, the real estate sector also faced a similar situation. Investors were fortunate to prevail when they asserted that corporate tax cuts had disadvantaged pass-through investment structures like REITs.
BDC experts believe that tax incentives will attract capital flows and investors.
BDC has become a focal point of attraction in recent months thanks to its high profitability. Investment bank Robert A Stanger & Co. reported that BDC attracted nearly $44 billion in capital flows last year, up 70% from 2023.
Industry experts believe that tax incentives will certainly stimulate more investors and capital flows. One person stated that the Republican party group drafting the law believes that this reduction will 'promote capital formation.'
Others noted that when the Senate Finance Committee considered this proposal, it was overlooked after lobbying campaigns aimed at expanding tax benefits to other funds. With rising estimated costs, senators chose to withdraw the proposal. However, activists are developing a streamlined version to minimize opposition.
Source: https://tintucbitcoin.com/du-luat-trump-uu-dai-thue-tien-dien-tu/
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