Demands on both sides of the Atlantic for changes to the tax treatment of private equity managers are gathering force. Partly, no doubt, this is for bad reasons. Many of these managers have made fabulous sums in recent years. Such riches, and the boastful parties sometimes thrown to celebrate them, have drawn lascivious media attention. A desire merely to punish these extraordinarily successful financiers—whose clients pay without complaint—animates some of those calling for higher taxes. That is a harmful and unworthy instinct which ought not to be appeased.
The United States, even in its present mood of economic discontent, is less given than most countries to outbursts of animosity against the working rich. Strength of feeling on the subject is driven by the fact that the tax treatment of these managers, as compared to the treatment of other very highly paid individuals, really is anomalous. Take the anger and disgust away, and disinterested considerations of efficiency and fairness urgently demand a change.
