Carried interest

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Carried Interest
Carried interest is the part of gains granted to the general partners from the private equity. The method is used as compensation with the aim of motivating the fund manager who in this case is the general partner. Through the settlement, the fund manager gets motivated to improve the performance of the funds. The amount is estimated to range between 20-25% percent of the annual gains. The yearly amount charged for management which makes up to 2% of assets funds is used to compensate the general partner. However, it is essential to realize that the gains are only allowed in the event where the invested capital generates profits.
For the taxation purposes, the carried interest is viewed as returns on capital. In this regard, it is required for the general partners to remit personal tax of their gains which goes at a rate of 23.8%. The 20% of this total amount is for the capital gains while 3.8% stands for the investment tax. Although this system is seen as a market-distorting loophole and unfair by some partners, it is highly consistent with other ventures tax systems.
Rubenstein, a wealthy member of the tax Certiorari, is known for providing tax assessment for his client in residential and commercial tax purposes (West, 23). Through his tax savings, he has initiated several private firms. On behalf of the national heritage, he has dramatically utilized his tax savings in patriotic, philanthropic activities. This is done through individual loaning and financing of development projects.

Considering the existing tax policy in the state, the progressive tax gives citizens a chance to take a flat rate system or get a complete exclusion from tax depending on their income. Those with little tax remittance under the current system are unlikely to make use of credits and deductions to lessen their tax burden. This seems undesirable because the low earners in the state already remit an unequal amount of their income as taxes.

Work cited
West, Darrell M. Billionaires: Reflections on the upper crust. Brookings Institution Press, 2014, 21-32.