Members of Congress have recently proposed to more than double the tax rate on the general partner’s share of a limited partnership’s profits, known as carried interest, from the long-term capital gains rate of 15% to ordinary income tax rates of up to 35%. This increased tax on limited partnerships would represent a departure from longstanding tax principles. It would undermine incentives for innovation, entrepreneurship, capital formation, and productivity growth that lead to
rising paychecks for American workers. It would drive down the values of American pension funds, companies, and real estate even as America’s preeminent position in the global economy is being challenged by China, India, and other fast-growing emerging market nations where government leaders are designing policies to attract American capital.