0:00

hey, it's ryan i'll

0:02

call you bob mcmillen who you've heard from

0:04

many reporter will be hosting

0:06

show period

0:11

this

0:11

week congress is expected to

0:13

pass a major piece of legislation

0:16

it's

0:17

the woman spends billions of dollars

0:19

on climate and health care programs and

0:22

to pay for the bill raises taxes

0:24

on big

0:25

companies but there was

0:27

one text that democrats just couldn't

0:35

there were concessions and one

0:37

of the biggest concessions

0:40

was you know in in a little

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bit of a surprise this to

0:44

the private actually

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adding that , calling

0:47

julie bike oh it's she says that

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the private equity lobby has been hard

0:51

at work protecting and obscure type

0:53

of income of something called

0:56

carried interest

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what is carried interest

1:01

in the simplest terms it's a major

1:03

source of income for private equity managers

1:07

the first thing to know about carried interest income

1:10

is that it's that it's said a lower rate

1:12

than ordinary income

1:14

the job of a private equity manager is

1:16

to handle private investments

1:18

then when a deal pays off

1:20

they get a

1:21

that carried interest the part

1:23

of how their compensated for their services but

1:26

tax law doesn't treat it like regular

1:28

income taxed at a much

1:30

lower rate

1:32

something both democrats and republicans

1:35

have been trying to change for more than a decade

1:38

the time and again

1:39

they fail

1:41

this is a rare example where

1:43

it is crystal clear that the

1:45

lobbying for an industry made

1:47

the difference and the private equity

1:50

lobby has been making the difference on

1:52

this particular tax issue for

1:55

fifteen years it's really

1:57

one of the most successful lobbying campaign

1:59

that we ,

2:02

here in washington and and

2:07

to the jobs are show about money

2:09

business and powered i'm bob

2:11

macmillan it's thursday august

2:18

coming up on the how

2:21

powerful lobby protecting carried

2:23

interest

2:32

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[unk]

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later to learn more

3:08

carried interest is a dream of compensation

3:11

and it's a concept that much older

3:13

than today's private equity funds

3:15

centuries older

3:18

i [unk] carrying and carried interest comes

3:20

from the sixteenth century back

3:22

then carried interest was how sea captains

3:25

made money

3:26

captain would load up a ship with goods and

3:28

, responsible for sailing it safely

3:30

across the sea it was their job

3:33

to navigate risky waters from storms

3:35

right coasts and maybe even

3:38

pirates but if they made

3:40

it deport a payoff was huge

3:42

the good got sold and the captain to

3:45

get decent profits today

3:48

the players are different

3:49

ten if he captain's risking their lives

3:52

it's private equity managers risking

3:55

their funds money

4:00

they've carried interest lived a quiet

4:02

life in american tax law

4:04

no one really ever thought about

4:06

it because

4:07

private equity

4:09

not quite different a

4:11

couple of decades ago it's

4:13

just exploded as an end

4:15

stream than now it's

4:17

sort of has grown to include partnerships

4:20

and real estate manufacturing health

4:22

care just about everything you

4:24

can think of

4:26

private equity managers can make tens

4:28

of millions of dollars a year through carried

4:30

interest alone

4:32

that money that and tax like boggling

4:34

the richest americans have a to explain of thirty

4:37

seven percent carried interest

4:39

on the other hand is only tax at twenty

4:41

percent nobody paid

4:43

much attention to carried interest until two

4:45

thousand and seven when democrats

4:47

in congress said this isn't

4:49

there that year they

4:51

introduced a bill that would have raise taxes

4:53

on carried interest

4:55

it was a huge threat to private equity

4:57

managers

4:59

we couldn't do much about because they

5:01

didn't have a strong lobby emotion

5:04

what did are lobbying operation look

5:07

like back then

5:08

in two thousand and seven the

5:11

private equity

5:12

the industry had

5:14

according to the lobbyists said i've

5:16

talked to basically

5:18

no interest in washington

5:21

that change very quickly because

5:23

when the taxes on

5:25

one of your major sources

5:27

of income are about to potentially

5:30

go up quite a bit it

5:32

, be time to pay attention in washington lobbyists

5:36

and the difference private equity firms got

5:38

together and said you know like let's move in

5:40

on washington and

5:41

and figure something out

5:43

there for snap created treatment

5:46

enter a private equity

5:49

no little bit better when you get

5:51

a press release or statement from

5:53

the private equity council then

5:56

you know okay are or a carlisle

5:58

or blackstone the end ritual from said has

6:01

a little bit more of a booth

6:03

behind it

6:04

there's second step and

6:07

a lot of money

6:09

in two thousand and six private

6:11

equity firms paid three point six

6:13

million dollars to lobbyists the

6:16

next year at number balloons

6:18

twenty million dollars according

6:20

to the nonpartisan center for responsive

6:22

politics

6:24

and that's not all

6:25

this is just kind of the way

6:28

it works and washington

6:30

you not only pay lobbyists that you start

6:33

reading , fundraisers to start

6:35

raising money for thirty

6:38

years and congressional candidate than

6:40

paying attention to presidential politics

6:42

and you may then as an industry

6:45

rates and individual farms get

6:47

yourself into a position where you're

6:49

helping a lawmaker by making

6:52

ads for their reelection

6:55

and that totally paid off

6:58

the bill to get rid of carried interest didn't go

7:00

anywhere

7:05

though you start a trade group

7:07

you spend some money at the heart

7:09

of it the message here is tax

7:12

relief for the very rich right

7:14

i mean it seems like they must have also

7:17

worked on a better message than that

7:19

are you saying that tax relief

7:21

for the very rich is not and electorally

7:24

winning method

7:25

it may not

7:27

be the best yes

7:29

that that's right and now lives as very

7:31

early realization was you know lox

7:33

it

7:34

not work entirely to have

7:37

blackstone ceo traipsing

7:39

over to the hill and talking about how

7:42

you know he deserves a

7:44

tax break not necessarily

7:46

the best attacks

7:48

though the private equity lobby

7:50

refine their message they

7:52

argued that when private equity thrive

7:55

so did the american economy because

7:57

a lot of businesses get funding from private

7:59

equity

7:59

firms

8:01

they said raising taxes on carried

8:03

interest with harm the economy

8:06

the lobby took their message to lobby

8:09

they began arranging tours for them in

8:11

their districts to show off businesses

8:13

funded by private equity the

8:16

strategy weren't and ,

8:18

ten lawmakers took another shot

8:20

at carried interest that that

8:22

failed to to then

8:25

and twenty sixteen after nearly

8:27

a decade of fighting off the democrats

8:30

something kind of unexpected happened

8:32

this time they had to fight off a repeat

8:47

this episode is brought to you by bank of america

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can help you go where for your ambitions to take

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you what would you like the power to do bank

9:11

of america private bankers and division of bank of america

9:13

and a member of thc in a wholly owned subsidiary

9:15

of bank of america corp

9:23

during his twenties sixteen campaign

9:25

donald trump worked hard to appeal

9:28

to working class americans we're

9:31

, through through greatest

9:33

jobs best in the

9:35

history of the world so true

9:39

on the campaign trail trump

9:41

promised tax cuts for most americans

9:43

and tax hikes for the rich

9:46

trump had a line of populists

9:50

language and his campaign speeches

9:52

at his rallies about ending

9:55

favorable tax treatment for the red sea

9:57

know we're gonna make everything's fair

9:59

that's one guys

10:01

getting away with murder their magic tremendous

10:03

amount of money they have to break at i

10:05

want to lower the wage for the middle class the middle

10:07

classes or what they're getting absolutely

10:09

destroyed

10:11

you themselves as an example like i

10:13

know these guys can save money because

10:16

they know exactly where to go in the tax code

10:18

to the tax rates

10:20

were

10:21

all bad

10:22

one thing i do is get rid of carried interest

10:24

the one of the greatest provisions

10:27

people like me to be honest with

10:29

the overarching ,

10:32

on the campaign trail was i

10:34

know how things work because i'm because rich

10:36

guy and so i am the perfect person

10:39

to go and

10:39

and seems things to become

10:41

more fair because i know where the secrets

10:44

after trump one

10:45

the republicans got on board

10:47

they started working on their own plan to

10:50

change have carried interest tax

10:52

the industry at that point was

10:55

substantially freak outs they

10:57

had to rethink their

11:00

interactions with automakers at that point cause

11:02

exists they could into their strategy of

11:04

like keeping all the republicans on their side

11:06

enough democrats on their side they almost

11:09

have to do reverse engineering

11:11

and things like was sweet who is

11:13

on our side when it comes to republicans

11:20

lobbyists told julie that they

11:22

zeroed in on republicans who might

11:24

be willing to go against party leadership

11:28

the industry went to members

11:30

who are not likely to understand

11:33

tax code members who are not likely

11:35

to have really ever even heard

11:38

of this issue before and

11:40

kind of played into that in a leadership

11:43

is wanting to do this

11:45

we don't think it's a good idea appealing

11:47

to third base instincts to be

11:50

obstructionist in a way to their own party

11:52

they got a letter signed by about two dozen

11:55

conservative house members the message

11:57

was clear they block any

11:59

law

11:59

that came with a tax hike on carried

12:02

interest

12:03

you just kind of put up a little

12:05

bit of a wall in , republican

12:08

party party

12:10

to everyone it's not worth

12:12

it it's not worth messing with carried interest

12:14

you don't want to do mere entire tax bill and

12:16

by the by this is a republican

12:19

issue to begin less you know what

12:21

you're doing is kind of attacking

12:24

corporations and business leaders and

12:27

it works it's definitely worth

12:30

the in the end republicans tweaked attacks

12:32

on carried interest

12:34

that they didn't raise the right

12:36

so that's where things stood until this year

12:39

when democrats proposed a huge

12:41

senate bill to address climate and health

12:43

care issues applicants hated

12:45

the bill and one democrat had problems

12:47

with the to arizona senator

12:50

kyrstin cinema cinema

12:53

has had a long relationship with the private

12:55

equity lobby dating back to her very

12:57

first election campaign

12:59

you could look at it and say the

13:01

industry has identified her

13:04

as someone very ,

13:06

on it's side and is essentially

13:08

rewarding her by contributing

13:10

to her campaign's or

13:13

you could look at it like the industry

13:16

has worked very hard to

13:18

make sure that she

13:20

is on it's side and contributing

13:23

to her campaign are there to say

13:25

that those securities and investment

13:28

executives and their industry political

13:30

action committees has been

13:32

as a group of the second highest

13:35

contributors the her campaigns for senate

13:38

since she first ran in twenty seventeen

13:40

second only to retirees

13:43

when the bill included changes to carried

13:45

interest

13:46

cinema box

13:48

there was this element of mystery like

13:50

white will person cinema do

13:53

then , started emerging through her conversations

13:56

with arizona business

13:59

leaders with

13:59

her campaign

14:02

donors with lobbyists west's

14:05

any one that she was in a room where she

14:07

was explaining like look i still

14:09

object to this i don't favor

14:12

this change security interests

14:14

according to julie's reporting

14:16

cinema thought that fiddling with carried interest

14:18

was foolish because congress had

14:20

just find it infrastructure and manufacturing

14:22

projects which she says rely

14:25

on private equity

14:26

he didn't wanna do some sort of compromise

14:28

on it she just wanted it out of the bill

14:31

and when you need sixty votes plus

14:34

the vice president

14:35

you can say no and you can tank

14:37

an entire deal and ,

14:40

ultimately the democrats want to

14:42

ruin their entire feel that was

14:45

meticulously put together a comeback

14:47

from the data couple of times over

14:49

a provision that provision sort of wonky

14:51

and the tax code difficult to

14:54

explain difficult

14:56

to make clear

14:58

ads on for voters they

15:00

decided it wasn't worth it and that

15:02

that's what happened again and again the overtime

15:05

with carried interest

15:11

in the end carried interest

15:13

was cut from the bill

15:15

it survived again

15:21

what is ultimately say about congress

15:23

as efforts to tax the rich

15:26

an optional

15:27

our when you got powerful lobbying

15:29

groups who are working very hard to keep

15:32

things status quo

15:33

i think that the sats that's

15:36

even worse

15:37

a democratic white house and

15:40

democrat controlled chambers

15:42

congress we still

15:44

have nots hello

15:47

the so called carried interest loophole

15:50

a that's all you need to know about

15:52

the lobbying campaign if ever there is a

15:54

time to get this to over

15:56

the finish line it would seem [unk] the

15:58

now and yeah

16:21

there's always a coal production gimlet and wall

16:23

street journal additional reporting

16:25

in this episode by miriam

16:32

the listening see tomorrow