Once Venice's government was comprised of people who knew how to make money and create jobs, there was a dramatic increase in financial and legal innovation.

The Medieval Geniuses Who Invented Carried Interest and the Modern Barbarians Who Want to Tax It


by Drew Armstrong


IIt’s no secret that both Donald Trump and Hillary Clinton fail to understand that taxation is theft. Neither was even willing to retain the few laudable provisions that exist in the tax code. Instead, they used class warfare to condemn what is commonly referred to as “carried interest.”

Carried interest allows the investment manager of a fund or partnership to be compensated with the profits of the funds. The proceeds are taxed as capital gains rather than income.

Despite the heated rhetoric, the provision of law is based on a historical parallel that dates back to the Middle Ages. A look back into history shows how carried interest was created and why it is a vital component of a thriving society.

Merchants Fuel Long-Distance Trade

Think back to Venice, Italy in the year 1036. Due to the geographic location and numerous beneficial alliances, Venice began to grow wealthy as an international center of trade. Up to that point, the Venetian head of state, or Doge, had absolute power and was always selected from one of the three wealthiest families. But as the wealthy merchant class grew, so did their power, and by 1036 the first merchant was elected as Doge.

As the wealthy merchant class gained power, Venice’s trade greatly expanded, creating enormous opportunity for its citizens. 

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Read more: fee.org