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No Interest in 'Carried Interest'?

Thursday, 27 May 2010 | 11:42 AM ET

There's a challenge that sometimes arises when you work in a fairly dedicated part of journalism, like business news or sports coverage: How far do you go to serve your core audience while maintaining a connection with a more general audience?

The whole debate about taxing carried interest gives rise to that question. And with some immediacy, since Congress is debating the issue.

The argument? How to tax hedge fund managers. Generally they get paid a fee, which is taxed as ordinary income, and a portion of the profits they make for their investors, which is taxed at the lower capital-gains rate.

Congress, looking to help plug a budget hole, is thinking about taxing that profit portion at the ordinary-income rate. That's a budget bonanza or a big tax bill, depending on whether you are a congressman or a hedge fund manager.

Our colleague at the New York Times, Andrew Ross Sorkin, pointed out another wrinkle in the debate this morning on Squawk Box. If you are a hedge fund manager and you sell your fund ... well, that could get taxed at the ordinary income as well. (Check out Sorkin's comments here)

If you are in the hedge fund business, you are probably highly interested in this issue. Indeed some people are passionate about what this hike could mean for investment incentives. (check out BET Founder: Carried Interest Will Hurt Pension Funds). Just as passionate are those who believe the industry should pick up more of the nation's tax bill (See this debate between lawyers at opposite ends of the argument).

But is the investing world at large as engaged? My traffic monitors are telling me "no." Sure, our stories on the subject are getting solid interest. A large part of our audience is, no doubt, tied to the hedge fund or private equity business in some way. But it is not overwhelming interest, at least not on the scale of our market coverage or stock blog or European debt crisis. Indeed, Carol Bartz's F-Bomb gets more attention.

Sure it's an important debate. But one with limited appeal. Editors at sports sites probably encounter the same thing when it comes to explaining the arcane details of league contract talks. The term "carried interest" has the added detriment of immediately signaling "complicated issue ahead" to readers.

Hey, we'll keep covering it. Just don't expect it to get the marijuana treatment.

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