'08 Candidates Walk Political Tightrope on Tax Issue

Edwards, a Democrat, received about $497,000 from investment and securities firms in the first three months of his campaign, according to the Center for Responsive Politics.

Edwards has also gone farther than any other leading Democratic candidate in calling for the elimination of the loopholes that currently allow the managers of these firms to defer taxation by shifting their income offshore.

"You want to know what I mean by Two Americas? A tax code that lets hedge fund and private equity managers making hundreds of millions a year pay taxes at a lower rate than their secretaries is wrong," read a statement released Wednesday by Edwards.

"Building One America means getting rid of loopholes like the one that lets these investment advisers treat most of their compensation as capital gains. Carried interest is compensation for work, and it should be taxed like other pay," the Edwards statement reads.

Edwards' position could put him at odds with his former employer, Fortress Investment Group, a hedge fund that paid Edwards $479,000 in 2006 for working as a consultant before the start of his 2008 campaign bid.

Fortress has reportedly allowed managing partners to avoid paying U.S. income taxes by reinvesting profits in off-shore tax shelters.

The congressional effort to change the tax has been met with a powerful lobbying efforts in Washington. Eleven of the wealthiest private equity firms have joined together to create the Private Equity Council, including Apollo Management, Bain Capital, the Blackstone Group, the Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co., Apax Partners, Providence Equity Partners and Silver Lake Partners.

"There is certainly an effort to educate all lawmakers and anyone with an interest in public policy as to what the contributions that private equity has made to economic growth and investors including pension funds," said Robert Stewart, vice president of public affairs for the group.

"If you increase the value of an investment and have made a profit, you've taken a risk, and should be taxed at the same rate as any other partnership is [taxed]," added Stewart.

Venture capitalists -- those firms that invest early on in budding businesses -- are also lobbying against the congressional measure to increase taxes on "carried interests."

"These are people who are investing in two guys in a garage," said Emily Mendell of the National Venture Capital Association. "It's a long-term investment; it's a risky investment and any compensation derived from that should continue to be taxed at the capital gains rate, the same it's always been," she said.

Both lobbying groups said they are not targeting the presidential candidates specifically on the issue.

However, others said the candidates are getting an earful about the issue as they campaign for cash.

"Most major firms have donated serious bucks to the candidates," said Primack.

"One of the reasons why you donated the maximum to a candidate is so you can get that candidate's ear ... I would be stunned if they're not taking full advantage of that and trying to persuade them to oppose this legislation."

ABC News' David Muir and Raelyn Johnson contributed to the report.

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