It appears that the managers of private firms are threatening to stop doing deals if they don’t get to keep their tax loophole.

This is bulls%$#. A private equity firm that does not do deals is shut down. Furthermore, they make a lot of money now.

While I do not support the capital gains tax break, I don’t see why we should favor unearned income over that created by honest work, the theory is that you reward people for risking their own money. Here, their fees are for managing someone else’s money. It’s normal income period.