You may have heard, oh, several thousand times, that Republicans protected their pals on Wall Street when they failed in 2017 to kill the provision that treats “carried interest” like capital gains rather than regular income. Well, don’t look now, but the draft House tax bill does the same.
Carried interest is the share of profits that partners in hedge funds or private equity receive as compensation as a kind of performance fee. It is only paid if the fund’s return meets a certain threshold and under current law only if it’s held for three years. We’d prefer no such provision if tax rates were low enough, but it’s a useful incentive for risk-taking in a high-tax-rate world.