lawmakers are debating a major tax break for the private credit industry, a move that could cost the federal government $10.7 billion over the next decade while simultaneously cutting critical services for low-income Americans.
The provision, part of President Donald Trump’s sweeping fiscal legislation known as the “big, beautiful bill,” aims to reduce taxes on dividends distributed by business development companies (BDCs) — investment vehicles commonly used in private credit markets. The bill has already passed the House of Representatives but is still under discussion in the Senate.
According to sources familiar with the matter, intense lobbying efforts are underway to reinstate the tax break in the Senate version of the bill. While it was initially excluded from the Senate draft, supporters argue that reinstating the provision would align BDCs with real estate investment trusts (REITs), which received similar tax benefits under Trump’s 2017 tax reforms. This argument is being branded as “REIT parity.”
Critics, however, say the proposal prioritizes wealthy investors at the expense of the most vulnerable. Senator Elizabeth Warren slammed the measure, saying:
“This is what armies of lobbyists and an infinite arsenal of political donations get you: massive tax breaks at the expense of healthcare, education and food assistance for American families.”
The proposed tax break comes as the House-passed bill includes sweeping cuts of over $1 trillion to essential social programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP) by 2034. The Congressional Budget Office (CBO) has also warned that the overall bill could increase the U.S. deficit by $2.4 trillion during the same period, with minimal impact on economic growth.
Private credit funds, including those operated by giants like Blackstone, Ares Management, Apollo Global, and Blue Owl Capital, have grown rapidly since the 2008 financial crisis. These firms have taken advantage of lighter regulations to become key lenders to mid-sized companies across the U.S.
Supporters of the tax break argue that it would encourage further capital inflows into BDCs, enhancing their ability to fund American businesses. Industry sources claim this would support economic growth and job creation in the private sector.
However, Brandon DeBot of the Tax Law Center at NYU countered that the proposal would
“reduce resources for the lowest-income households while providing large tax cuts for high-income investors.”
Lobbyists also argue the measure would make dividend income from BDCs more appealing by making a portion of it tax-exempt, which could further drive fundraising. In 2023, fundraising for BDC-like vehicles hit $44 billion, a 70% increase from the year before, according to investment bank Robert A. Stanger & Co.
While the measure was dropped in the Senate due to concerns over cost and attempts to broaden the benefit to other fund types, sources say a simplified version is being considered for reintroduction.
As the debate unfolds, the proposal represents a broader tension in U.S. fiscal policy — between fueling private investment and protecting vital public services. The final decision will reveal which side of that line Congress is willing to stand on.