The Riverside Companys Pam Hendrickson: Think Twice Before Raiding Carried Interest

In a Wednesday Wall Street Journal op-ed, Pam Hendrickson, COO of The Riverside Company, makes the case that carried interest is taxed appropriately as a capital gain, and that in the end, businesses across America benefit.

“Some have characterized it as an unfair loophole that must be closed,” writes Hendrickson. “But from where I sit, any policy that ensures that capital can flow freely to businesses seeking to grow and create jobs is crucial. And that is why the current tax treatment of carried interest — as a capital gain — is entirely appropriate.”

Carried interest follows a basic tenant of partnership law, Hendrickson points out, that “individuals are taxed based on the character of the partnership’s profits, meaning that if the partnership receives a capital gain, so does the individual partner.”

Hendrickson highlights the importance of incentivizing risk-taking in order to grow and create more valuable businesses across the country.

“America has always rewarded those who invest capital and take risks to start or grow a business. Private-equity firms do this every day. There are more than 2,600 private-equity firms operating all across this country. Many are small and invest in local businesses with a few million dollars in sales or revenue. These businesses are starving for capital in today’s tough economy, and they crave investors who go beyond trading securities to provide intellectual capital and expertise to help them grow.”

To read the full piece, click here.

To learn more about carried interest, watch our latest Private Equity at Work white board video: