This Article argues that the policy arguments for taxing capital gains at lower rates are not compelling when applied to carried interest. Moreover, those arguments that do weakly support taxing carried interest at long-term capital gains rates can be neutralized by a simple reform: if investment fund managers were required to pay taxes on carried interest on a simplified mark-to-market basis–that is, if investment fund managers were taxed on the amount of the fund’s appreciation allocated to them, whether realized or unrealized, every year–there would remain no justification for taxing carried interest at a preferential rate.
