Wall Street Prepares to Defend Carried Interest, a Favored Tax Break, Again

We’ve got a whirlwind of news out of Washington — the carried interest tax exemption in the cross hairs, the latest on DOGE and an update on settlement talks between CBS and President Trump — but you should also pay attention to this news out of Washington State.

Amazon said it planned to spend $100 billion on capital expenditures this year, the “vast majority” of which was meant to capture a “once-in-a-lifetime type of business opportunity” in artificial intelligence. That level of spending eclipses what Google, Meta and Microsoft each have committed to spending on A.I. infrastructure.

It shows yet again that one of the key fears about the rise of DeepSeek — the Chinese start-up’s staggering efficiency — leading to a sharp drop in spending on pricey chips and data centers — was wrong. But are American tech giants making the right call here?

A new fight over carried interest

President Trump has outlined his tax priorities to Republican lawmakers. Among them was a surprise: the so-called carried interest “loophole.”

That could mean Wall Street will have to brace for a big fight to keep one of its most cherished tax breaks.

Carried interest was one of several items Trump mentioned yesterday, according to Karoline Leavitt, the White House press secretary. He reiterated ideas he promoted on the campaign trail, including ending taxes on tips, overtime and Social Security payouts, as well as expanding deductions for state and local taxes.

But his call to end the carried interest exemption — and tax breaks for “billionaire sports-team owners” (many of whom supported Trump) — wasn’t on many observers’ bingo cards.

A reminder: Carried interest is the cut that hedge fund, private equity and venture capital investors take from their funds’ profits, which is taxed as capital gains and therefore at a far lower rate than regular income.

Carried interest has long been criticized as a giveaway to wealthy financiers. Opponents of the exemption include Republican and Democratic lawmakers and prominent business leaders including Warren Buffett and JPMorgan Chase’s Jamie Dimon. Getting rid of it, they say, could raise billions for the government.

That could be important for Trump, who’s seeking to extend other tax cuts he enacted in 2017 and would benefit from ways to offset that lost income. (“BALANCED BUDGET!!!” Trump posted on Truth Social just now.)

Presidents have tried to kill it before, including Barack Obama, Joe Biden — and yes, Trump, who once called the tax break “good for Wall Street investors and for people like me but unfair to American workers.”

But the carried interest break has survived again and again, thanks to powerful defenders in Washington. Members of both parties in Congress, including the then-Democratic Senator Kyrsten Sinema in 2021, have opposed efforts to kill the carried interest exemption.

Heavy lobbying by industry groups undoubtedly helped keep it alive as well. Financiers’ allies are already readying their defenses.

Could this time be different? Congressional Republicans appear more loyal to the Trump agenda and more driven by populism. “The battle over carried interest is likely going to be the toughest yet,” an unidentified strategist told The Financial Times.

Then again, Republican lawmakers — who hold only slim majorities in both chambers — are already having trouble agreeing on a budget. Financiers could benefit from those divisions.

HERE’S WHAT’S HAPPENING

The Trump administration plans to fire thousands of workers across several agencies. The White House will cut nearly 10,000 jobs at the U.S. Agency for International Development, The Times reports. The group, which administers humanitarian aid around the world in the interest of the United States, will be reduced to fewer than 300 staff members. The administration also plans to eliminate positions in the Department of Health and Human Services, the Food and Drug Administration and the Centers for Disease Control, The Wall Street Journal reports. Related: A federal judge paused Trump’s earlier effort to get federal workers to resign. More than 40,000 workers had accepted the offer.

Questions arise about the finances of Trump’s pick for F.B.I. director. The Senate Judiciary Committee pushed to next week a vote to advance the choice of Kash Patel; the move came amid revelations that he owned a stake in the parent company of Shein, the fast fashion retailer, worth at least $1 million and received a stock award of at least $800,000 in Trump Media and Technology Group. So far, however, Republicans haven’t indicated unwillingness to reject Patel.

President Trump meets with the PGA Tour’s commissioner. The tour said that Trump met on Tuesday with Jay Monahan and the golfer Adam Scott, who sits on the group’s board, according to DealBook’s Lauren Hirsch and The Times’s Alan Blinder and Jonathan Swan; he also spoke by telephone with Yasir al-Rumayyan, the governor of Saudi Arabia’s sovereign wealth fund. The meeting took place as the Justice Department considers whether to approve a venture between the tour and a Saudi-backed rival.

Is Elon Musk’s cost-cutting testing its limits?

The so-called Department of Government Efficiency, Elon Musk’s increasingly powerful cost-cutting team, is busy expanding its work across Washington. But there are more emerging signs that the unusually powerful initiative may be overreaching.

Here’s the latest news about government cost-cutting efforts:

The Senate confirmed Russell Vought, an ardent advocate for huge cuts in government spending, as director of the Office of Management and Budget.
President Trump directed the General Services Administration to terminate “every single media contract,” Axios reports, after social media posts falsely showed millions of dollars flowing from the U.S. Agency for International Development to Politico. (They actually described government subscriptions to the Politico Pro service.) The Agriculture Department said it canceled its subscription to Politico Pro.
Musk’s cost-cutting group is set to focus on potential cuts at the Social Security Administration, according to Semafor. While Musk’s team has drawn outcry from Democrats for its efforts to slash spending at other agencies, anything that disrupts Social Security could draw significant backlash.
Wired reports that a Musk employee, Marko Elez, had the ability to write code in the Treasury Department payment system despite a denial by department officials. Elez resigned from DOGE yesterday after The Wall Street Journal asked about his links to a social media account that advocated racism and eugenics.
New opinion polling shows that Musk and his cost-cutting efforts have become unpopular with the public: A survey by The Economist and YouGov this week, for example, found that 49 percent of respondents had unfavorable views of him, compared with 43 percent who had favorable opinions.

The Trump E.T.F. goes “patriotic”

President Trump’s war against environmental and social investing (along with diversity, equity and inclusion) has hit a new front.

His social media company plans to sell financial products, including a Bitcoin exchange-traded fund, aimed at what he calls the “patriotic economy.”

What’s happening: Trump Media and Technology Group (which trades under the ticker DJT and jumped 6 percent on the news) filed trademark applications for a bunch of E.T.F.s.

They’re meant to give investors a chance to put money into “American energy, manufacturing and other firms that provide a competitive alternative to the woke funds and debanking problems that you find throughout the market,” Devin Nunes, Trump Media’s C.E.O., said in a statement.

Look for these funds to include businesses that line up with Trump’s agenda. It’s not hard to imagine the right-wing video platform Rumble, crypto companies or gun makers being listed in one of these funds. Consider also American energy companies hoping to drill on federal land or businesses that only manufacture in the U.S.

It’s Trump’s way of creating an investment philosophy that directly opposes the E.S.G. movement that took hold under former President Joe Biden. Backlash against such efforts prompted lawsuits against companies like BlackRock, and now E.S.G. investing has fallen out of favor.

The E.T.F.s would allow Trump to anoint companies and executives with his approval. In Trump’s first term, world and business leaders often booked rooms at the Trump International Hotel in Washington to curry favor. (He sold it in 2022.)

While Trump is not directly involved in running his social media company, he owns 53 percent of it. Some financial products described in the trademark applications may need approval from the S.E.C., but given the Trump administration’s blitz of activity across Washington, they are likely to win the necessary approvals.

The bottom line: Selling financial products regulated by agencies under Trump’s control opens up a wide range of potential conflicts of interest.

What a CBS transcript says about a big media deal

After President Trump sued CBS for what he claimed was a deceptively edited “60 Minutes” interview with former Vice President Kamala Harris during the campaign, the broadcaster — under pressure from the Federal Communications Commission — released a full transcript of the interview.

It’s common practice for news organizations to shorten interviews in news articles or TV broadcasts for the sake of concision. And CBS said the transcript shows that the “60 Minutes” broadcast “was not doctored or deceitful.”

But Trump asserted yesterday that the show and the network “defrauded” the public, arguing that “CBS should lose its license, and the cheaters at ’60 Minutes’ should all be thrown out.”

What does this mean for the proposed multibillion-dollar merger by CBS’s parent company, Paramount, and Skydance? The setup of the F.C.C. review could give us a clue.

A recap: Trump’s charge of media bias at CBS could come up in the agency’s review of the Paramount-Skydance deal. Brendan Carr, the new F.C.C. chairman, requested a full transcript of the interview.

But that may not necessarily slow the deal review. While Carr requested public comment on the “60 Minutes” interview, he created a new docket for it, rather than using the one he had opened for the review of the Skydance deal.

In theory, that means he could rule on the Skydance acquisition before the public comment period on the CBS transcript concludes.

What’s next? Trump has until today to amend his complaint against CBS — and if his latest statement is any indication, he has not grown tired of the fight.

For Skydance, knowing the outcome of that case may be as important as getting Carr’s go-ahead.