OF the many injustices that permeate America’s byzantine tax code, few are as outrageous as the tax rate on “carried interest” — the profits made by private equity and hedge fund managers, as well as venture capitalists and partners in real estate investment trusts. This huge tax benefit enriches an already privileged sliver of financiers and violates basic standards of fairness and common sense.
President Obama recently suggested that he would ask Congress to close this loophole. Eliminating the carried-interest tax rate should be an easy sell. It should play to Republicans’ supposed hatred of government handouts and to Democrats’ commitment to social justice.
But because of the financial lobby’s clout, the loophole most likely won’t be closed. If it isn’t, shame on both parties for giving us another reason to distrust our democracy and our capitalist system.
While the tax legislation passed on Jan. 1 increased the top individual-income tax rate to 39.6 percent from 35 percent for couples making more than $450,000 and individuals making more than $400,000, it left carried-interest income taxed at just 20 percent.