People who make between $40,000 and $85,000 per year pay a top federal income rate of 22%. Anyone who makes more, pays more — except billionaire private equity managers. Here is how it works. Private equity firms buy up other companies, do whatever they can to increase their value, and then try to take them public or sell them at a profit. The managers of private equity funds, known as general partners, receive a share of the profit (usually around 20%) as payment for managing the money in the private equity fund. This cut of the profits is known as "carried interest."
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