What's the Problem with Carried Interest?

August 2007
Bloomberg Law Reports
William Dantzler Jr.

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In the last few weeks, the press has been full of articles about hedge fund managers and private equity fund managers paying only 15 percent federal tax on their compensation through a structure called "carried interest." Although the preferential federal capital gains tax rate was designed to encourage capital investment, critics say that fund managers earn carried interest through their labor and so should be taxed as regular wage earners.