JPMorgan CEO Dimon backs US taxing carried interest, warns of bond market trouble

Synopsis

JPMorgan Chase CEO Jamie Dimon advocates for taxing carried interest, aligning with Donald Trump's efforts to close the loophole benefiting private market investors. Dimon suggests using the additional revenue to double income tax credits, benefiting communities and families. He also cautioned about a potential "crack in the bond market" due to government overspending and quantitative easing.

JPMorgan Chase CEO Jamie Dimon said on Friday that the U.S. should be taxing carried interest, joining the criticism of a loophole that enables private market investors to benefit from lower taxes.

"We absolutely should be taxing carried interest," the biggest U.S. bank's top boss said in an interview at the Reagan National Economic Forum, aligning with U.S. President Donald Trump's recent campaign to close the provision long-cherished by investors.

Dimon proposed using the revenue to double income tax credits, even for individuals without children, noting that the estimated $60 billion additional cost from this initiative would directly benefit communities, families and homes.

He also warned of a "crack in the bond market", citing the U.S. government's overspending and quantitative easing, adding that while the market may panic when it happens, the bank would likely benefit.

Market makers like JPMorgan often benefit from volatility, as frequent exchange of assets drives up brokerage fees for their trading desks.

Trump's flip-flop on trade policies, along with suggested tax cuts and spending surge, have sent the bond markets tumbling in recent weeks. The rise in treasury yields post "Liberation Day" tariffs, which Trump described as the bond market acting "yippy", forced him to hit a 90-day pause on tariffs.

"I'm hoping that we change both the trajectory of the debt and the ability of market makers to make markets," Dimon warned, while suggesting the "crack" could appear in "six months or six years".

PRIVATE MARKET LOOPHOLE

Carry, which refers to the part of private fund managers' compensation tied to profits generated, is currently taxed as a long-term capital gain, allowing fund managers to pay lower taxes compared to ordinary income.

Closing the loophole has been a bipartisan issue for over a decade, with successive administrations promising to close the loophole. A 2021 Congressional Budget Office estimates that doing so would raise tax revenue by $14 billion over 10 years.

Private equity and hedge funds have opposed such legislation, saying it could potentially hurt small businesses as well as institutional investors, such as endowments, foundations and pension funds.

Industry groups in February had opposed Trump's plan to close the lucrative tax workaround.

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