I think the partners’ disproportionate
share of the upside should absolutely be taxed as ordinary income. That’s what it is. Other than PEs being more willing to take on more risk because of the asymmetric returns (that investors sign up for btw) if you fixed the tax advantages (loophole) of treating what are effectively success bonuses as a capital gain, I don’t know that there would be too many differences between PE and public equities except that the PE firms are very good at attracting investors who are willing to give huge upside to the firm. I don’t know how you stop that in a free market economy, but you can absolutely tax it properly.
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In response to this post by RickPerry)
Posted: 07/03/2020 at 12:55PM