Gore Could Benefit From VC Fight

In addition to hedge funds and private-equity firms, the so-called "carried interest" tax measure in Congress would also cost venture capitalists -- perhaps including former vice president and recent Nobel Peace Price winner Al Gore.

VC giant Kleiner Perkins Caufield & Byers recently announced that Gore will join the firm as a partner in its effort to finance global-warming solutions, and it said he will donate 100% of his salary from the arrangement to charity. However, it made no mention of what he will do with stock options and potentially hefty carried-interest-related fees.

Meanwhile, Kleiner Perkins is an outspoken opponent of legislation on Capitol Hill that would tax carried-interest earnings for investment partnerships at the 30% rate for ordinary income instead of the lower capital gains rate of 15%. That puts Gore's new employer at odds with many of his fellow Democrats.

Ted Schlein, a partner with Kleiner Perkins who is also chairman of the Venture Capital Association, says carried interest is a capital gain, so it should be taxed as such. Typically, investment firms including VCs and hedge funds pocket a fifth of the returns they generate with their clients' capital.

"The carry may or may not be worth anything, so it's not really a fee for service," says Schlein. "Changing the tax rate on carried interest to ordinary income would be inappropriate tax policy, let alone not in the best interest of the country and the country's economy."