Government regulators have recently announced a new bill that would tax private equity firms' profits as ordinary income instead of capital gains income. For years, private equity firms like Blackstone have invested their clients' money and had the proceeds taxed at the capital gains rate of 15% instead of the corporate tax rate of as high as 40%. Now regulators are arguing that the fees these private equity firms collect (usually a portion of their returns) should be taxed at the corporate tax rate as ordinary income instead of the lower capital gains tax rate. This income is known as carried interest. Government officials argue that if you invest other people's money and make a profit, then that profit should be taxed as ordinary income - it's as simple as that.