What is carried interest, and how should it be taxed? Q.What is carried interest, and should it be taxed as capital gain? A. Carried interest, income flowing to the general partner of a private investment fund, is generally treated as capital gains for the purposes of taxation. This tax preference is viewed as an unfair, market-distorting loophole by some but consistent with the tax treatment of other entrepreneurial income by others. Read more about What is carried interest, and how should it be taxed?
What is the personal exemption? Q.What is the personal exemption? A.Personal exemptions for both taxpayers and dependents provide that only a person’s income above some defined basic level is subject to tax. This helps ensure that the poorest households are not subject to the income tax. In 2017, the personal exemption is $4,050. Read more about What is the personal exemption?
What is the flat tax? Q.What is the flat tax? A.While any tax system with flat rates could be called a flat tax, the name “flat tax” is usually reserved for a system developed by Robert Hall and Alvin Rabushka in a 1985 book. Their flat tax is really a two-part VAT, with all value added except wages taxed at the business level and wages taxed at the individual level at the same flat rate, but with an exemption related to family size. Read more about What is the flat tax?
