The New York Times ran an excellent opinion piece ^[1] yesterday on the bizarre carried interest loophole, tailor-made to nearly halve the tax rate for a tiny sliver of financiers:

Millions of general partners in investment funds receive carried-interest income when they earn profits for their clients. Since these partners do not have to risk any of their own capital, carried interest is really a taxpayer-subsidized fee for managing their clients’ money . . . . No other affluent Americans enjoy this benefit. A brain surgeon, stockbroker, corporate lawyer or actor will have to pay the new top marginal rate percent, while a general partner who manages other people’s money pays, on carried-interest income, only the 20 percent rate on long-term capital gains. . . . The difference in revenue to the United States government when this combined income is taxed at 20 percent rather than at 39.6 percent is about $11 billion annually.

I imagine there are plenty of think tanks ^[2] happy to characterize this discrepancy as a reflection of (their donors’) wisdom and free enterprise at work. I vaguely recall some academics defending it years ago. But is anyone still doing so, given that we now know how lavishly the finance sector is subsidized ^[3], and how tax policy exacerbates inequality ^[4] in so many other ways?

1 Comment To "Carried Interest Loophole: Is Anyone Still Defending It (for Free)?"

#1 Comment By Shag from Brookline On February 28, 2013 @ 7:22 am