House GOP takes on the rich with tax reform plan

The GOP is taking on wall street.

Republicans want to close one of the most ridiculous tax loopholes in America known as "carried interest."

As part of a major tax code overhaul, Republican House Ways and Means Chairman Dave Camp said Wednesday he will close a loophole that has netted the top Americans billions of dollars.

Whose benefited?

People like:

• Stephen Schwarzman from Blackstone - worth $7.7 billion.
• Henry Kravis from KKR, another private equity firm - worth $4.7 billion.
• John Doerr from Kleiner Perkins - worth $2.9 billion.

According to the Joint Committee on Taxation, they would pay billions of dollars over the next decade if the loophole was closed.

At a time when every dollar counts, some would there'd be celebration on Capitol Hill.

But Republicans and Democrats have been afraid of challenging these business titans and their lobbyists.

House Speaker John Boehner was asked about carried interest on the Hill today. His response? "Blah, blah, blah," before going on to say the plan is "the beginning of [a] conversation" lawmakers need to have about tax reform.

President Obama is also guilty of caving to lobbyist pressure. He promised to close the loophole in 2007, and it's still wide open.

The loophole allows these people to pay half the taxes they would otherwise. They currently pay a tax rate of 20%, but their regular income tax rate would top out around 35% under Camp's plan.

Some loopholes make sense. Camp's plan has a few supporters, but not many.

Erin Burnett explains why:

When you're a partner in a private equity firm, you get a cut of the profits you make from investing other people's money. Usually, it's a 20 percent cut.

If you invest money with one of these men and your investment goes up in value, they get to keep a cut of the profits. Now, it's your money that was put at risk. While you get to pay the lower capital gains rate of 20% so do the guys, who simply manage your money. And their cut of the profits is a huge part of the money they earn.

Both parties get to pay the lower rate provided to Americans to encourage people to take risk - except it's not their money and it's not their risk.

They get to pay 20% on what is essentially their wages. Everyone else's wages are taxed at an ordinary income tax rate.

Burnett asks Michael Farr,  Author of "Restoring Our American Dream: The Best Investment," whether he thinks the tax reform will actually happen.

"What I'm hearing from my friend Greg Valliere at Potomac research is that the Republicans don't want to touch much of this a minute before they have to and certainly not before the mid-term election," says Farr. "I think something could happen but I think it's going to take a while."