Obama speaks on private equity firms

Reid's assurance all but ends the year's highest-profile battle over a major tax increase. Democratic lawmakers, including some presidential candidates, had been pushing to more than double the tax rate on the massive earnings of private-equity managers, who the Democrats say have been chronically undertaxed.

<>The move to tax private-equity earnings began last spring after some of those companies, also known as buyout firms, started to sell themselves to the public. Their initial public offerings forced the firms to disclose how much their managers earn, and the amounts reached into the hundreds of millions of dollars.

Several prominent lawmakers expressed surprise to find that the managers' profits, known as carried interest, were taxed as capital gains, for which the rate is usually 15 percent. That is less than half the 35 percent top rate paid on regular income.

A leading legislative proposal, which originated in the House, would tax carried interest as regular income. By one back-of-the-envelope calculation, the change could raise an extra $6 billion a year in personal income taxes.

That proposal was authored by Rep. Sander M. Levin (D-Mich.) and sponsored by Rep. Charles B. Rangel (D-N.Y.), chairman of the House Ways and Means Committee. Rangel has said he wants to pass "the mother of all reforms" and that the carried-interest provision might be included. So far, though, the tax-writing panel has not scheduled a drafting session for the measure. And with little hope for Senate concurrence, a House-passed measure on the subject would have only symbolic value.

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