This is a tax break for a few wealth people who pay a lower tax rate than the common taxpayer on certain income. Carried interest is compensation for a service and should therefore be taxed at ordinary income rates. Moreover, capital gains rates do not apply to other types of income that involve some risk-taking, such as performance-based compensation. Estimates are that eleinimating this loophole would generate $12 Billion in tax revenue over 10 years. Those against the preferential tax treatment of carried interest contend that removing the tax break would also increase the tax system’s transparency and fairness by treating individuals and businesses in similar circumstances more equally.
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