While the lower rate for carried interest may be unpopular, it plays an important role in encouraging strong investment in hedge funds. The consequences of raising the tax on carried interest could be severe (“Republicans vow to keep taxes low on investment income,” News, Aug 27).
Hedge funds and private equity play an important role in injecting new capital into the economy, allowing the expansion of businesses and the hiring of new employees. These tax proposals would create a disincentive for new investment and add to the capital freeze that is prolonging our current economic stagnation.
The higher rates are essentially a special tax just for the financial entrepreneur and a politically motivated move against Wall Street designed to demonize financial companies who some argue played a role in the current recession.