08May

Board of Supervisors Backs Effort to Close Carried Interest Loophole, Raise Billions for California Public Schools

Los Angeles, CA– Today, the LA County Board of Supervisors followed Supervisor Janice Hahn’s recommendation to back state legislation sponsored by the Reclaim Our Schools LA Coalition that would close the carried interest tax loophole and raise billions of dollars for California public schools.

“California has the 5th largest economy in the world and is home to the most billionaires in the country,” said Supervisor Janice Hahn. “And yet, we fall far behind almost every state in education spending. By finally closing this loophole, we can make sure some of the wealthiest Californians pay their fair share and that our schools get the funding they need to succeed.”

The carried interest tax loophole is an obscure tax law that allows hedge fund managers to be taxed at 20%– much lower than other Americans despite being some of the nation’s top earners.  Although there was discussion in the 2016 campaign of closing this loophole, the recently passed tax overhaul legislation let the carried interest loophole stand.

Supervisor Janice Hahn urged her colleagues to back state legislation to close this loophole. Under AB 2731, authored by Assemblyman Mike Gipson, an additional 17% tax would be levied on to hedge fund managers in California who currently benefit from the carried interest tax loophole.  The funding raised under this proposal would go toward public schools, early childhood education, career technical education, and school counseling.

“Currently, California is 46th in the nation in per pupil spending, at approximately $11,000 per student annually,” said Assemblyman Mike Gipson. “Now is the time for California’s elected leadership and educational justice groups to stand together and ensure that California’s students have access to the resources they need to succeed. AB 2731 is a crucial step in creating adequate and equitable funding of our schools.”

“It is ridiculous that some of the highest earning people in our community have lower tax rates than other people who work for a living,” said Morris Pearl, chair of the Patriotic Millionaires organization and former managing director of BlackRock.  “We believe that people who have higher earnings should have higher tax rates, not lower tax rates.”

The motion passed with a vote of four to one, with Supervisor Barger voting no.  The Board will send a letter to the LA County Legislative Delegation, members of the Assembly Appropriations Committee, and Governor Jerry Brown in support of AB 2731.