Private equity tax hike loses steam in Senate - The chamber probably won't vote on the plan this year, but the House remains interested.

Influential House members remain interested in the measure. But Senate Majority Leader Harry M. Reid (D-Nev.) has quietly signaled to the investment firms that he does not plan to schedule the tax hike for consideration before members adjourn for the year, possibly next month.

"Sen. Reid has been saying for some time now that the fall schedule is tight, and we might not be able to do everything we want to do," Reid spokesman Jim Manley said in a statement Tuesday.

For months, the Senate majority leader has expressed doubt about the likelihood that his chamber would vote on the tax hike in 2007.

He recently assured private equity firms that that remains the case, the Washington Post reported Tuesday.

The issue centers on a tax provision that enables certain super-rich investors to pay less on their earnings than many working Americans.

The beneficiaries of this clause, including partners in private equity firms, are allowed to treat much of their earnings as capital gains, which are taxed at 15%, rather than as ordinary income, whose maximum tax rate is 35%.

Private equity firms specialize in taking troubled companies private, whipping them into shape and reselling them for huge gains.

In the process, some are rewarded with lavish profits and billions of dollars in wealth.

The tax provision emerged as a public issue this year, when news reports spotlighted some of these companies and their wealthy managers.

For example, when Blackstone Group went public in June, the ownership stake of Chief Executive Stephen Schwarzman was valued at about $7.5 billion.

The House and Senate have held several hearings on the subject, with critics assailing the tax provision as an unfair preference for the rich. A bill sponsored by Reps. Sander M. Levin (D-Mich.) and Charles B. Rangel (D-N.Y.), who is chairman of the Ways and Means Committee, would eliminate the preference for private equity, hedge, venture capital and some other firms.

Democratic presidential candidates, including Sen. Hillary Rodham Clinton and Barack Obama, also have expressed the view that super-rich investors should not enjoy lower tax rates than middle-class workers.