private equity tax question

i’ve been reading about the situation between PE tax and lawmakers. the gains are taxed at 15% rather than 35%. they are classified as Cap Gains and not as ordinary income. my question is what is the difference?

Is this a serious question?

There’s a serious question there. For example, suppose you start a business and put $100K and 8000 hrs into the business. If the business grows and you draw a salary it’s taxed at regular income rates. If you store up value in the business and sell it, you get cap gains rates. Economically, you have done the same thing, but the taxation is different.

I suppose the “dividends” they pay out is considered the income stream?

You can do lots of clever things to turn income producing activity into capital gains with PE.