Democrats Ready Carried-Interest Tax Hike After 15-Year Lobbying Campaign

Senate Democrats are poised to raise taxes on a key source of private-equity managers’ income, capping a 15-year quest to close what many lawmakers see as an egregious gap in the tax code.

The tax increase on fund managers’ carried-interest income, which is tied to the performance of investments when they are sold, had seemed dead until late Wednesday. But then Sens. Joe Manchin (D., W.Va.) and Chuck Schumer (D., N.Y.) included it in a last-minute deal that the Senate could pass as soon as next week. If Senate Democrats can prevent any defections and keep the carried-interest change in the bill, it is likely to be the only direct tax increase on individuals included in the party’s climate and healthcare legislation.