Last night the Senate passed a bill to fix the Alternative Minimum Tax, which keeps vacuuming in non-rich households and hitting them with high taxes, an outcome Congress never intended. But it failed to replace the lost revenue and refused to tax venture-capital and hedge-fund partners at the rates everybody else pays. In other words, it made sure regular folks don't have to pay fat-cat rates. But it refused to make sure fat cats pay regular-folks rates. Charles Rangel, chairman of the House Ways & Means Committee, reportedly said he won't oppose removing a tax increase on venture- and hedge-fund managers in a bill that the House passed.

Much of the personal compensation that private-equity partners receive is taxed at the low (15 percent) capital-gains rate, even though it's not capital gains. Called "carried interest," it's employment income for coming to the office every day and doing a good job. The low long-term capital-gains tax is for people who actually put capital at risk in the economy. To the extent that private-equity managers aren't doing that, they shouldn't be given the capital-gain rate. They should pay income rates -- of up to 35 percent. This loophole costs the government billions that it should be getting from people who receive a sweetheart rate and can most afford to pay it. From Bloomberg:

Some Democrats said they would oppose scaling back the alternative minimum tax unless other taxes are raised to avoid adding to the federal deficit. House Majority Leader Steny Hoyer, a Maryland Democrat, said yesterday that he ``will not vote for an AMT patch that is not offset, even if I am the only member to do so.''