Carried Interest Fairness Act of 2021

The Carried Interest Fairness Act of 2021 proposes to change how the profits earned by investment fund managers—often called "carried interest"—are taxed. Currently, these earnings are typically taxed at the lower capital gains rate used for long-term investments; this bill would instead require them to be taxed at the higher ordinary income tax rates applied to standard wages.

For the average citizen, the bill’s primary impact would be an increase in federal tax revenue collected from private equity, hedge fund, and real estate investment managers. The legislation also subjects this income to self-employment taxes and increases penalties for underpayment, while providing specific exemptions for certain family-owned partnerships.