How Carried Interest Stays Taxed as Capital Gains

Episode 35 of The Tax Policy Podcast tackles the carried interest loophole — why private equity and hedge fund managers pay a lower tax rate on their performance fees than most middle-class workers pay on their salary. Lucas and Luna walk through how the tax code treats 'carried interest' as a capital gain rather than ordinary income, saving top fund managers tens of millions per year. They trace the history of the provision back to 1993 and explain why multiple reform bills have failed to close it. Specific numbers: a typical general partner earning $50 million in carried interest in 2026 pays about 23.8% federal tax (20% capital gains plus 3.8% net investment income tax), while a doctor earning $300,000 is in the 35% bracket — nearly 12 percentage points higher. They also discuss the political dynamics, the industry lobbying effort, and what a Biden-era reform might look like if revived. A focused look at one of the most durable and controversial tax preferences in the U.S. code. #CarriedInterest #PrivateEquity #HedgeFunds #CapitalGains #TaxLoophole #TaxPolicy #WealthInequality #Economics #TaxReform #Lobbying #BidenTaxPlan #GeneralPartner #LimitedPartner #InvestmentManagement #TaxCode #FexingoBusiness #BusinessPodcast #Podcast Keep every episode free: buymeacoffee.com/fexingo