The Distributional Consequences of Private Equity

Grant description:

This project will use administrative tax data to better understand the distributional consequences of the tax subsidy for private equity. The study includes three analyses: First, the co-authors will quantify the preferential tax treatment of private equity profits in several stages and then calculate the change in tax liability if carried interest was taxed as ordinary income. Second, they will compare tax on private equity income and loss flows to the counterfactual tax liability to understand how private equity firms make strategic decisions to distribute profits to nontaxable investors. Third, they will examine the consequences of private equity acquisitions for workers across the income distribution by tracking the long-run labor market outcomes of workers employed at firms acquired by private equity.