"The titans of private equity typically buy and sell companies using borrowed money and cash invested by their clients. They then charge investors in their funds an annual management fee of two per cent, and also pocket about twenty per cent of any profits that the funds generate. The current tax system allows them to classify much of their fee income as capital gains for tax purposes, even though it was their clients who risked their capital. Instead of paying the top federal income-tax rate of thirty-seven per cent on this money, they pay the capital-gains rate of twenty per cent."
Jim Holland, SCDPOK
