Democrats Blink On Carried Interest

Democrats Blink On Carried Interest

You may have heard, oh, several thousand times, that Republicans defended their friends on Wall Street when they failed to kill a provision in 2017 that treats “interest” like capital gains instead of regular income. . Well, don’t look now, but that’s how it is in the draft House tax bill.

Carred interest is the share of profits that are received as compensation to partners in a hedge fund or private equity in the form of a performance fee. It is paid only if the withdrawal of funds meets a certain threshold and is held for only three years under the current law. We would not have preferred such a provision if tax rates were significantly lower, but it is a useful incentive to take risk in a high-tax-rate world.

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