The carried interest loophole lets private equity profits avoid ordinary income tax
Evidence
How is this clearly predatory behavior legal, you might ask. It’s called the “carried interest loophole.” Because the acquisitions are structured as investments, PE firms can treat the profits as investment income, which are taxed at the much lower capital gains rate, permitting the whole racket to occur. Closing this loophole is a recurring, popular, bipartisan campaign promise (Barack Obama, Hillary Clinton, Donald Trump, and Joe Biden all promised to end it), but lobbying by the financial sector, as well as the revolving door between government and big business, have ensured the survival of this destructive loophole. — Andrew deWaard, Derivative Media, 138
Categorization
Category: Definitional Content
- DEFINE: Defines the carried interest loophole precisely: PE profit is structured as investment capital gains, taxed at the lower rate, and protected by lobbying.
- XREF: Connects to the reader’s aim of tracing a financial instrument from Wall Street to a formal feature — this is the enabling tax structure underneath catalog acquisitions and rollups.