The rise of the professionalized private equity firm and all of the big brands that these private equity firms are buying. What does that have to do with the lower tax tier of capital gains that you have been telling us about? Well, the reason it's so important is because the private equity firms did something very clever in how they structured their own compensation. They collect 20% of the profits that they make investing other people's money.
Carried interest is a loophole in the United States tax code that has stood out for its egregious unfairness and stunning longevity.
Typically, the richest of the rich pay 40 percent tax on their income. The very narrow, select group that benefits from carried interest pays only 20 percent.
Earlier versions of the Inflation Reduction Act targeted carried interest. But the loophole has survived. Senator Kyrsten Sinema, Democrat of Arizona, demanded her party get rid of efforts to eliminate it in exchange for her support.
How has the carried interest loophole lasted so long despite its obvious unfairness?
Guest: Andrew Ross Sorkin, a columnist for The New York Times and the founder and editor-at-large of DealBook.
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