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By Adam Thorp July 1, 2016

Hillary Clinton accurately says Donald Trump's plan is good for hedge funders

Hillary Clinton is attacking Donald Trump’s tax plan, saying it actually benefits the hedge fund managers Trump had promised to cut down to size.

"Now, before releasing his plan, Trump said, ‘Hedge fund guys are getting away with murder.’ And he added, ‘They’ll pay more,’ " Clinton said. "Then his plan came out. And it actually makes the current loophole even worse.

"It gives hedge-fund managers a special tax rate that’s lower than what many middle-class families pay," Clinton continued in the June 21, 2016, speech. "And I did have to look twice because I didn’t believe it. Under Donald Trump’s plan, these Wall Street millionaires will pay a lower tax rate than many working people."

Trump’s plan does roll back one high-profile advantage for hedge fund partners. Is Clinton right to say they still come out ahead?

Trump took an aggressive position on tax rates for hedge fund managers during his fight for the Republican nomination. In an interview with CBS in August, Trump called them "paper pushers" who "did not build this country." In a Republican debate in September, Trump said his tax plan would make them pay more.

"The hedge fund guys won’t like me as much as they like me right now. I know them all, but they’ll pay more," Trump said.

After the Republican debate, Trump released the outline of his tax plan.

Trump’s plan eliminates the so-called carried interest tax loophole, which allows general partners in private investment firms (including most hedge fund managers) to treat some of their income as income from investments, or capital gains, subject to a top tax rate of 23.8 percent, instead of the much higher tax rate for ordinary income (43.4 percent).

Under Trump’s plan, income from carried interest would no longer be treated as capital gains. Tax rates for ordinary income tops out at 25 percent under Trump’s plan. This looks like a hike in line with Trump’s promises.


Along with private equity and venture capital funds, many hedge funds are structured as partnerships. Under Trump’s plan, income through a business partnership is taxed at a rate of no more than 15 percent, significantly less than the 23.8 percent they previously paid, according to an analysis of Trump’s tax plan from the nonpartisan Tax Policy Center.

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Eliminating the carried interest "loophole" actually helps these hedge fund managers under Trump’s plan. If carried interest was still treated as capital gains, it could be taxed at the top rate for capital gains in the plan (20 percent), higher than the fixed 15 percent tax for partnership income.

Trump’s plan presents the discounted rate for partnership income as a way to help "the small businesses that are the true engine of our economy."

It also helps large businesses and wealthy financiers who structure their businesses as partnerships, including the hedge funds managers he attacked in his campaign.

Clinton also said that rates for hedge fund managers would be lower than for middle-class families under Trump’s plan. Defining the middle class can be tricky, but in the Pew Research Center’s range of $42,000 to $125,000 for a household of three in 2014, a substantial number of middle-class households would make enough to qualify for a marginal tax rate of more than 15 percent if Trump’s plan were enacted.

Not all of these people would pay more than 15 percent overall, according to Bob Williams at the Tax Policy Center, and it would be difficult to say how many middle-income people would pay more than hedge fund managers once the many different variables involved played out. But some would, Williams wrote in an email.

In May, Politico reported that the Trump campaign had engaged two economists to craft a new tax plan. The Trump campaign has not confirmed whether they plan to re-write their tax plan, and did not respond to Politico’s request for comment. The tax plan announced in September remains on Trump's website, and is the basis of this article.

The Trump campaign did not respond to our request for comment on this article.

Our ruling

Clinton said Trump’s proposed tax rate for hedge fund managers "makes the current loophole even worse."

She has a point. By setting a lower tax rate for income from business partnerships, Trump’s tax plan would benefit many hedge fund managers. Though the plan would cut tax rates for middle-class families as well, the cuts that would apply to most hedge fund managers are steeper and their resulting tax rate is lower.

Trump promised that his tax plan would roll back advantages for hedge fund managers. Instead, in most cases, it would improve their position.

We rate the statement True.

Our Sources

Bloomberg, "Trump's Tough Talk on Hedge-Fund Taxes Doesn't Match His Plan," May 9, 2016.

New York Times, "Trump Plan Is Tax Cut for the Rich, Even Hedge Fund Managers," Sept. 28, 2015.

Email interview, Bob Williams of the Tax Policy Center.

Politico, "Trump Launches Tax Plan Re-write," May 11, 2016.

Report, "An Analysis of Donald Trump’s Tax Plan," Jim Nunns, Len Burman, Jeff Rohaly, and Joe Rosenberg, Tax Policy Center, Dec. 22, 2015

Report, "America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas," Pew Research Center, May 11, 2016

Tax Policy Center, "What is carried interest, and how should it be taxed,"

Trump Campaign, "Tax Reform That Will Make America Great Again," Sept. 28, 2015.

Transcript, Face the Nation interview with Donald Trump, CBS, Aug. 23, 2015

Transcript, Second Republican Presidential Debate, Times, Sept. 18, 2015

Transcript, "Hillary Clinton in Ohio: Trump Shouldn’t Have His Hands On Our Economy,", Clinton Campaign, June 21, 2016.


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