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Carried-Interest Change Would Hit Top Wall Street Brass, but Could Be Hard to Make Stick

Senate Democrats are trying to get some of the wealthiest people on Wall Street to pay more in taxes, but that may not be as simple as they hope.

The last-minute deal between Sens. Joe Manchin (D., W.Va.) and Chuck Schumer (D., N.Y.) struck late Wednesday included a tax increase on carried-interest income, which private-equity and hedge-fund managers receive when their investments are sold for a profit. Under current rules, carried interest on investments held at least three years can qualify for long-term capital-gains tax rates, which are well below those applied to ordinary income.