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Carried interest is a money manager’s share of the profits made by investing clients’ money — typically, around 20 percent. If those profits were made on investments held for more than a year, they’d qualify for the long-term capital gains tax rate of 20 percent, instead of the earned income tax rate of nearly 40 percent. This would apply to both the clients’ share of the profits, and the money manager’s “carried interest” share. Some, like the Private Equity Growth Capital Council, argue that it’s an important driver of economic growth. The"carried interest" loophole, allows billionaire hedge fund managers (and some others) to pay taxes on interest at capital gains rates. This windfall amounts to at least $10-billion/year. [http://www.huffingtonpost.com/al-lewis/sanders-repeaing-the-corruption-tax_b_8161684.html Huffington Post]
As explained in this [http://www.nytimes.com/2015/09/18/business/with-trump-as-foe-carried-interest-tax-loophole-is-vulnerable.html?_r=0 NYT] article, carried interest is the percentage of investment gains that hedge fund managers, private equity executives and venture capital partners take as compensation, usually in addition to a management fee. (“Two and twenty” has become Wall Street jargon for these funds’ typical compensation scheme, meaning 2 percent of assets under management and 20 percent of any gains.) Because the “carry” is tied to performance, it is treated like an investment and subjected to the lower capital gains tax rate, rather than as ordinary income, even though most managers don’t put any of their own money at risk. The loophole taps into the public’s insecurities over the fairness of the tax system, and whether it unfairly benefits the wealthiest Americans.
"There is one thing that Bernie Sanders, Hillary Clinton, Jeb Bush and Donald Trump all agree on — their professed dislike of the “carried interest” loophole." -[http://www.pbs.org/newshour/making-sense/carried-interest-simply-tax-break-ultra-rich/ PBS]
