Private equity and hedge funds have raised concerns over a US government plan to raise the level of tax on carried-interest income which could be damaging for both small businesses and big institutional investors, according to a report by Reuters.

Private equity and hedge funds have raised concerns over a US government plan to raise the level of tax on carried-interest income which could be damaging for both small businesses and big institutional investors, according to a report by Reuters.

Carried interest is a tax break that allows many private equity and hedge fund financiers to pay a lower rate of capital gains tax on income, instead of higher income tax rates.

Senators have been considering a change to the rule – which is expected to raise an additional $14 billion in tax revenue – for over a decade now.

The proposed change would mean that carried interest would only apply to investments after five years rather than three currently, and is part of wider plan by Democrats to up taxes on corporations and wealthy individuals to finance additional spending on energy, electric vehicle tax credits and health insurance investments.