TY - JOUR T1 - The Impact of Increasing Carried Interest Tax Rates on the U.S. Economy JF - The Journal of Alternative Investments SP - 62 LP - 77 DO - 10.3905/jai.2008.708850 VL - 11 IS - 1 AU - John Rutledge Y1 - 2008/06/30 UR - https://pm-research.com/content/11/1/62.abstract N2 - This article examines recent congressional proposals to increase the tax rate on the general partner's share of a limited partnership's profits, known as carried interest, from the long-term capital gains rate of 15% to ordinary income tax rates of 35%. Specifically, the article shows that carried interest impacts approximately $15.3 trillion in partnership capital employed by 16.2 million Americans across every sector of the U.S. economy engaged in capital formation. Increasing the tax rate on carried interest would lead to changes in the structure of partnership agreements; incremental tax collections would be small. To the extent the tax increases could not be avoided by restructuring, the costs would be borne by all the members within the investment process, including general partners, limited partners and their beneficiaries, and owners and employees of portfolio companies. Increasing carried interest taxes would reduce the amount of long-term capital available to the U.S. economy and undermine investment, innovation, entrepreneurial activity, productivity, growth, and the ability of U.S. companies to compete in the global market.TOPICS: Real assets/alternative investments/private equity, legal/regulatory/public policy ER -