Myths and Facts about Private Equity Fund Managers — and the Tax Loophole They Enjoy

July 19, 2007 03:12 PM | | Bookmark and Share

Congressman Sander Levin (D-Mich.) has introduced a bill (H.R. 2834) in the House of Representatives to eliminate a tax loophole that allows private equity fund managers to pay taxes on their compensation at a much lower rate than other working people have to pay.

Most of us who earn an income from work are subject to federal income taxes at progressive rates, starting at 10 percent and going up to 35 percent for the very wealthiest. Private equity fund managers are at the top of this wealthy group, but nevertheless pay only 15 percent — the special low capital gains tax rate — on almost all of their compensation. This form of wages, called “carried interest,” can run into the hundreds of millions or even in excess of a billion dollars a year for individual fund managers.

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