"For hedge funds, this is an unmitigated benefit as their tax liabilities could drop significantly," said Robert Willens, an independent tax consultant. "Obviously, they are quite enthusiastic and there may be a few fist bumps along the way."

A manager whose hedge fund earns $50 million a year, for example, would be paying some $19.8 million in taxes, or 39.6 percent, under the current rules. That could drop to as little as $7.5 million if the rate were cut to 15 percent.


Aside from the pass-through proposal, an open question is what kind of treatment will be given to so-called carried interest. That allows managers to pay a tax rate as low as 20 percent, a loophole that Trump has railed against in the past.

Similarly, there is no clarity on whether businesses would be required to pay "reasonable compensation" to their managers, income that could be taxed at a higher rate, experts said. Including that could help Trump appeal to his base and mollify critics who say the plan is a giveaway for millionaires.

"Who needs to worry about carried-interest going away if you have a 15 percent pass-through tax rate," said hedge fund manager Jim Chanos, who runs Kynikos Associates. "This should really be called the 'Put Rich Guys Back on Top Tax Act of 2017.'"

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