Treat me like I am dumb

I consider myself fairly intelligent, especially when it comes to economics.
But, maybe because I haven’t found the right description, for the life of me I don’t understand the “carried interest” loophole.
Someone please explain it to me like I am stupid.

1 Like

This is a good definition. Basically, it allows general partners in investment management firms to classify some of their earnings (will vary from some to a large chunk) taxed as long term capital gains and not ordinary income. That means, at that level, 20-23.8% vs 37-40.8%

So, conceptually, it encourages partners to not withdraw their interest for at least three years, and leave that invested?

That’s true, and the article says most hold investments for 5-7 years. The bookkeeping on this must be horrendous. There have been proposals to eliminate it. I have yet to see a good analysis determining what the impact would be of eliminating carried interest, and suspect that very few in Congress have that understanding.

I don’t particularly like it and think that existing investment and partnership tax laws could be used, but that’s only my unfounded opinion and I would welcome someone else doing the hard work of confirming or disproving it.

I am pretty sure that I am smarter economically than the vast majority of Congress and I don’t understand it.
It appears to be a very complex scenario that effects very few people that either side could use politcally.
The main takeaway for me is that our tax code needs to be destroyed and started over from scratch.

You’re just reminding me of Denzel now.

Great movie and great actor.

One of the best.

Seems like it could get really messy if there is a performance agreement with a “claw back” clause that kicked in.