An article by Jane Sasseen begins, "As Washington grapples with the country's fiscal woes, the private equity industry is grudgingly facing a new reality: its long-held tax advantages are likely to disappear."
This is a misconception. There is no "tax advantage" for private equity carried interest. It's subject to the same capital gains treatment that other long-term capital gains, including founder's stock, are subject to. And the same rules apply to private equity as to real estate partnerships, oil and gas partnerships, hedge funds in cases where the funds have long-term gains, and venture capital.
As for the prediction at the top of the article, we shall see. I doubt it. A recent Bloomberg article pointed out, "If carried interest were taxed as ordinary income, the top rate on such profits would increase to 39.6 percent. High earners also face a 0.9 percent added tax on wages starting this year as a result of the health-care law. That means the top rate would be 40.5 percent compared to 23.8 for capital gains, or a 70 percent rise." If anyone thinks that either House Republicans or the Senate Democrats representing these partnerships are going to back that kind of tax increase on venture capital, real estate, or oil and gas, they may be surprised. And Senator Schumer has been pretty firm in opposing holding hedge funds or private equity funds to different standards than other investment partnerships.
Finally, there's a contradiction in the logic of the article. On one hand, it argues that the tax increase is inevitable because the revenue from the increase is needed by the federal government. On the other hand, much of the article is about how the managers may restructure their affairs so as to avoid the tax increase. If the tax increase is so easily avoided, it is unlikely to raise the amount of revenue that is predicted.