Wall Street Journal:  Should Carried Interest Be Taxed as Ordinary Income, Not as Capital Gains?:

The debate over the taxation of carried interest has been bubbling for years in Congress, to little, if any, effect. But the release of Mitt Romney's tax returns during the Republican presidential primaries—showing that much of the candidate's income has come from this source—has taken the debate to a whole new level.

In the private-equity business, carried interest is the share of the profit from the sale of a company that goes to the managers of the firm that bought and then sold the company.

Proponents of taxing that income at the relatively low capital-gains rate, as it is now, say it's only fair: It recognizes the risk private-equity managers take to earn that money. And they warn that raising the tax rate would discourage investment and cost jobs.

On the other side, critics say a change to the higher tax rate for ordinary income is only fair: Carried interest, they argue, is simply compensation for services rendered, and so should be taxed like any other ordinary income. And they dispute that a higher tax rate will have any significant impact on investment.

Michael Graetz, a professor of tax law at Columbia Law School, wants carried interest taxed as ordinary income. David Tuerck, executive director of the Beacon Hill Institute and a professor and chairman of the economics department at Suffolk University in Boston, believes it should be taxed as capital gains.

• Michael Graetz, Yes: It's an Unjustified Gift
• David Tuerck, No: It Would Hurt the Economy