The other shoe has dropped. A far more wide-ranging tax hike bill has been proposed in Washington. This one would indeed tax the "carry" as ordinary income not capital gains. It would have a profound effect. And it will surely be emotionally contested--lifestyles are at stake. Think of all those glorious suburbs in Conn., where alternative investment money has built Disney-like lives. They're not going to cede a cent without a fight. One could argue that the bill authors have picked some unnecessary fights. Swept up in their proposal are all kinds of partnerships beyond private equity and hedge funds. So you'll have the oil and gas and real estate crowds ready to fight as well. An interesting tack: The bill offers allowing capital gains rate on gains from personal money, but not on managed money. This war will rage. Interestingly, a similar battle is playing out in the U.K. A well-known buyout figure, Nicholas Ferguson, said this month that he and his cohorts "pay less tax than a cleaning lady."

For more:
- here's a New York Times piece on the bill