The Taxation of Carried Interest: Understanding the Issues

Congress has recently considered taxing the carried interest of private equity fund managers at ordinary rates rather than at the 15 percent rate that currently applies to a portion of this income. The proposed change is intended to promote neutrality between the labor compensation of fund managers...

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Bibliographic Details
Published in:National tax journal 2008-09, Vol.61 (3), p.445-460
Main Author: Viard, Alan D.
Format: Article
Language:English
Subjects:
Aggregate income
Allocation (Taxation)
Business structures
Carried interest
Collaboration
Corporate income taxes
Fiscal policy
Income taxes
Interest
Investment advisors
Investors
Laws, regulations and rules
Ordinary income
Partnership
Portfolio management
Private equity
Studies
Tax allocation
Tax planning
Tax reform
Taxation
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Summary:Congress has recently considered taxing the carried interest of private equity fund managers at ordinary rates rather than at the 15 percent rate that currently applies to a portion of this income. The proposed change is intended to promote neutrality between the labor compensation of fund managers and other types of labor income. The case for reform, though, is less compelling than initial appearances suggest. The proper treatment of carried interest raises difficult second-best questions.
ISSN:0028-0283
1944-7477
DOI:10.17310/ntj.2008.3.06