Private equity firms are in an understandable dither over the prospect that Uncle Sam may someday tax their phenomenal "carry" on investments as income, not capital gains. That would be a huge difference, 15 percent vs. 35 percent. Not sure whether this would apply to hedge funds as well. In one sense, this is a reflection of a domestic backlash [1] we've discussed recently. There may be some populist anger stirring out there, a sense that these deals are bad for shareholders and perhaps even the common guy. The TXU deal could be a turning point, given the notion that the private equity guys got the better end of the negotiations. The big private equity firms recently started a lobbying group, the Private Equity Council--this may be its first big issue.

For more:
- here's the New York Times article [2]