After Mitt Romney's defeat in the presidential election, Bain Capital, the private-equity firm he ran before taking up politics, wrote to its investors thanking them for their patience in the face of "political hyperbole and distortion."

It is not just Bain that will feel relief the election has passed: The discreet private-equity industry has not enjoyed the limelight. But the fallout is not over. A renewed look at the favorable treatment the industry has received from the tax man is surely coming.

Under existing "carried interest" rules, private-equity firms' profits are taxed at the rate imposed on capital gains, currently 15 percent. Romney's own tax returns, which showed he paid 14.1 percent in 2011, raised eyebrows during the campaign: Workers typically pay a top marginal tax rate of 35 percent on their income. The Obama campaign characterized carried interest as a "trick." The president wants to close the loophole.

The industry argues that its executives should be treated as entrepreneurs. The business of buying companies cheaply and selling them (if all goes well) for a profit generates capital gains. It involves the sort of risk-taking that policymakers seek to encourage by differentiating between income and capital-gains tax rates.

Hedge funds and other investors also generate capital gains but usually don't hold on to assets long enough to qualify for preferential tax treatment.

Critics counter that private-equity executives are more like investment bankers. Yes, their deals generate capital gains, but that does not entitle them to the lower rate. That is because the firms themselves are not the true risk-takers: Typically 98 percent of money used to fund buyouts comes from outside investors.

The 20 percent of profits that Bain Capital and its peers typically get to keep if they hit their targets (on top of the 2 percent of assets they take each year as a management fee) is akin to a banker's bonus, which is taxable at the higher rate.

"If you put in capital, you get capital gains. If you put in labor, you pay income taxes," says Michael Graetz, a professor of tax law at Columbia University.

Many in the industry privately admit the tax treatment to date has been generous. Others do so publicly, including Marc Andreessen, a prominent venture capitalist, and Joe Dear, the chief investment officer at CalPERS, a Californian state pension fund that is among private equity's biggest investors.

That makes the treatment of carried interest look like an easy win in the battle to right the public finances: Congress estimates $2 billion could be brought in annually, most of it from the super-rich.

Lobbyists for the industry warn that investment could fall by more than 10 times that amount (and that other sectors that use partnership structures, such as mining or real estate, could be hit inadvertently). That seems implausible. Only a third of private-equity profits comes from carried interest, according to one estimate, with the guaranteed annual management fee -- already taxed at 35 percent -- making up the rest. Private equity is alive and well in countries that treat carried interest as income.

There are many reasons to laud the way private equity is structured: Unlike other parts of high finance, private-equity executives really hit the jackpot only if they generate sizeable long-term returns for their investors.

Firms in the industry can, and do, fail. But a change in the way private equity pays its taxes is long overdue.