John Steele Gordon: 'Carried Interest' Is Not a Capital Gain
One of the artifacts of the tax code is that it treats "carried interest"—a share of the profits reaped by managers of an investment fund—as a capital gain. To most of us, this is a matter of little or no practical importance—but it is a big deal indeed for the managers of many private equity funds and some hedge funds.
Managers of these funds are compensated for their services in two ways. One is the annual management fee, usually 1% or 2% of a client's investment. The other is a share in the net profits of the fund's long-term investments. That share is often 30% or even more.
Carried Interest should have gone long ago - Like corn ethanol special interest corruption.
Private equity has a place in a free market economy, But it now far larger than it should be adding to employment instability and a slower than should be economy.
Some are true business managers who fix businesses. Most are just trust fund Progressives with personal or family contacts.