Changes

Those who argue against treating investment funds' profits as capital gains have two primary points. The first of which is that carried interest is only taxed when it is realized. Through this tax deferral, the carried interest can benefit from the time value of money. Thus, the general partners at the private investment funds then have what some perceive to be unfair tax advantage. The second and more emphasized point is that carried interest is subject to the capital gains tax rate mentioned in the previous section. Opponents of such treatment consider carried interest to be a performance based compensation, much like a bonus, and accordingly believe it should be taxed at the ordinary income rate. In their argument, the opponents frequently compare general partners' roles to those of corporate executives and mutual fund managers who are subject to the ordinary income rate.

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