At a New Hampshire town-hall gathering Sunday night, presidential candidate Pete Buttigieg joined the choir of Democrats singing the “tax the rich” refrain. Referring to the 2017 tax cut, Buttigieg took Republicans to task for “blowing a trillion-dollar hole in our budget” for something “America did not need.”

The South Bend, Indiana mayor proceeded to call for four new tax increases, including a “reasonable wealth tax or something like that” and a push to close corporate loopholes. But with the economy still roaring along -- despite Wall Street jitters -- and unemployment at lifetime lows, many of the Democrats calling for tax increases on investment managers and other wealthy investors face internal headwinds in the states, cities, and congressional districts they hail from.

Four of the nation’s top five states for private-equity investments last year are places that several 2020 candidates call home: Texas (Beto O’Rourke and Joaquin Castro), New York (Kirsten Gillibrand and Bill de Blasio), California (Kamala Harris and Eric Swalwell) and Minnesota (Amy Klobuchar), according a state-by-state report by the American Investment Council, a lobbying group representing private equity firms.

These investments represent a combined total of $271 billion in more than 1,500 businesses in those four states alone. Of interest to those businesses is one of the tax breaks routinely targeted by Democrats: carried interest. On the campaign stump, this tax break is routinely assailed as a boon to the wealthy and one of the prime factors behind the nation’s growing income inequality.

Now that the Democratic presidential campaign has been joined, investment managers, including the American Investment Council, are pushing back.

Carried interest, they say, is the “sweat equity” that investors and managers put into building a business, assisting its growth and realizing profits from long-term investments.

“Private-equity invests, supports jobs, and builds better businesses in every state across the country,” AIC President Drew Maloney said in a statement. Maloney has called current legislation targeting the tax “a direct assault on capital gains treatment that would unnecessarily harm entrepreneurs, business owners, endowment funds, and American workers in every state and congressional district in the country.”

At a time when Amazon is forcing local retail storefronts to close up shop, private-equity investments are growing brick-and-mortar businesses -- such as the Dollar Store, Dunkin Donuts, Yankee Candle and Hilton Hotels -- that, in turn, support local jobs, Maloney added. The private-equity industry also highlights that it consistently delivers the highest long-term returns to investors, which has helped provide reliable pension funds for teachers, firefighters and other government workers.

Ken Blackwell, a conservative former Ohio treasurer and secretary of state, used a decades-old quote from Jesse Jackson to explain his support for keeping the carried-interest benefit intact.

“Capitalism without capital is just another ism — and I can’t live on an ism,” he told RealClearPolitics. “It’s one of the most sensible things I’ve ever heard Jesse Jackson say. It’s about the productive use of capital where you want that use to take place.”

At the beginning of the Trump administration, Blackwell said, some $2 trillion to $3 trillion of capital belonging to U.S. corporations or wealthy investors was parked offshore in other countries “because the owners of that capital didn’t like the environment or the tax rate or the penalties associated with putting that capital to work in the United States.”

He and other Trump transition team advisers, he noted, stressed the need to get that money working in the United States by cutting taxes and regulations. “And now we’ve have sustained and improved economic growth over the course of now marching toward three years,” he said.

“So what you see now [from Democrats] is the politics of envy. And this march toward socialism, which really champions a more robust and central government intervention in economic decisions, has led them to be against the very things that has led to robust economic growth and job creation,” he said.

All of the top-tier Democratic presidential candidates have strongly backed plans to raise taxes on investment, particularly on carried interest, the tax break that allows investment managers, such as private-equity fund directors, to have investment income taxed as capital gains rather than as ordinary income.

The top rate on capital gains is 23.8% while the top rate for ordinary income is 37%. Sen. Tammy Baldwin, with the support of fellow Sens. Elizabeth Warren, Amy Klobuchar and Kirsten Gillibrand – all of whom are running for president — has introduced a bill that would tax that carried-interest income at ordinary-income rates instead of at capital gains rates. A host of labor unions and liberal groups have touted the legislation.

Bernie Sanders sponsored a similar measure in 2015, and former Vice President Joe Biden has long pressed for it.

“Let me tell you what carried interest is – you’re paying 30 percent and they’re paying 17 percent and some of them made a billion dollars – 28 made a billion dollars. … You think that’s fair?” the Democratic front-runner said in an interview three years ago.

Yet, the Obama administration didn’t use the political muscle to push the increased rate through Congress when Democrats controlled both chambers at the beginning of his presidency. In April 2016, Biden told CNBC’s John Harwood that the he and President Obama couldn’t get rid of the tax break because Obama didn’t have “the clear space” to use his bully pulpit to talk about “how unfair the tax system is.”

Earlier this year, California Democratic Sen. Kamala Harris, who is another top contender for her party’s presidential nomination, specifically called out the carried- interest benefit when a National Public Radio interviewer asked her how she would pay for her proposals directing money toward people at the lower end of the income scale, including a plan to give a $6,000 tax benefit to families making under $100,000.

Yet these Democrats aren’t eager to respond when asked if they’re concerned that raising taxes on private-equity firms would translate into less investment in local businesses. None of the top-tier candidates replied to RCP’s inquiries. Klobuchar’s presidential campaign spokeswoman did respond, but only to highlight her boss’s plan to use the money generated for efforts to promote mental health and fight opioid addiction. She didn’t respond to a follow-up about the impact raising taxes might have on business investment in Minnesota and across the country.

Democrats point out that, during the 2016 campaign, Donald Trump pledged to jettison the carried-interest tax break but also didn’t do so when he had the chance. Instead, the tax-cut law the president signed in December 2017 required investment managers to hold assets for at least three years in order to qualify for the tax preference, up from one year under previous law.

Donald Marron, a fellow at the liberal-leaning Urban Institute’s Tax Policy Center, argues that there’s a middle ground the right and left are ignoring. He told RCP that “lots of other structures” besides the current system can improve the operation of companies and create jobs, and called instead for an “appropriate deduction for the carried interest they pay.”

“If you get that part right, you can have your cake and eat it too,” he added.

Grover Norquist, who heads Americans for Tax Reform, a conservative supply-side organization, dismissed the carried-interest loophole debate as a perennial but unserious Democratic talking point “about how they don’t like rich people.” When Obama had Democratic majorities in both the House and Senate, they couldn’t pass it, he said, because enough lawmakers on both sides of the aisle are concerned about its impact on jobs and the economy.

Earlier this year, New York Gov. Andrew Cuomo backed a bill to tax the carried interest income as ordinary earned income -- but made the effective date contingent on the passage of similar legislation in five other nearby states. That legislative gambit, Norquist said, is tacit acknowledgment from New York Democrats that businesses and jobs would migrate out of state as a direct result.

Last month, a University of Southern California Marshall School of Business study said a proposed carried-interest tax rate would result in 370,000 lost jobs in New York alone and would deprive local government of $4.5 billion in annual tax revenues currently used to fund social programs and infrastructure projects.

“They realize that there really are damaging costs in the case of jobs and how you tax carried interest even though they talk like there’s no downside,” Norquist said. “You can tell when someone is posturing when they could have done it and didn’t.”