Understanding the Effect of Carried Interest Provisions on Fairness and Equality in the Taxation of Hedge Fund Profits

Authors

Nathan D. MaddenFollow

Abstract

Private equity and hedge fund managers (General Partners) typically receive a percentage share of the profits from the funds that they manage as part of their compensation for managing the investments made by investors. This compensation is commonly referred to as “Carried Interest.” General Partners are then entitled to a more favorable tax treatment of their compensation—as compared to most other taxpayers—by deferring the tax on Carried Interest and having it taxed at a lower, preferential rate. Many view these Carried Interest tax provisions as providing an unfair and unjustified tax advantage. This paper will explore alternatives that would arguably create a more equitable framework for taxing Carried Interest.

Recommended Citation

Madden, Nathan D. (2024) "Understanding the Effect of Carried Interest Provisions on Fairness and Equality in the Taxation of Hedge Fund Profits," Widener Commonwealth Law Review: Vol. 33: Iss. 2, Article 3.
Available at: https://cwldc.widener.edu/wclr/vol33/iss2/3