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==Abstract==

To many, the concept of carried interest is confusing or meaningless, and the question as to why anyone would debate something so arcane is even more so. In all likelihood, the concept of the exorbitantly wealthy Wall Street bankers or hedge-fund managers is much more familiar, so we will start from there. The objective of this blog post is to shed some light on the obscure world of "hedge funds," explain why the managers are perceived to pay so little tax, and explore recent political developments that may or may not affect that perception in the future.

While the controversy surrounding carried interest has existed for some time, it has faced increasing media scrutiny since the last presidential election when it surfaced that Mitt Romney paid taxes of $1.9 million on $13.69 million in income in 2011, an effective 14.1 percent rate<ref name = "mitt" />. Perhaps in response to the media and public uproar, the American Taxpayer Relief Act of 2012 raised what was then a capital gains tax of 15 percent to 20 percent and was signed into law by President Obama on January 2, 2013<ref name = "wiki" />. In the aftermath of the Great Recession, being akin to those "hedge-fund guys" is politically precarious. It wouldn't be surprising if the current election's focus on increasing the capital gains tax had something to do with Romney's blunders.

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