July 5 (Bloomberg) -- Democratic presidential candidate John Edwards embraced the idea of raising taxes on the managers of private-equity firms and hedge funds.

Edwards, who has made economic fairness a central issue of his campaign for the Democratic nomination, said he would announce within 10 days his position on a House bill that would force fund managers to pay taxes as high as 35 percent on their share of profits instead of the 15 percent capital-gains rate most pay now.

``It's not a big secret that I believe there's some unfairness in the tax code, and I think some of that unfairness applies to hedge funds and hedge-fund managers,'' Edwards, a former senator from North Carolina, said in an interview with Bloomberg Television's ``Political Capital with Al Hunt,'' scheduled to air today.

Edwards, 54, who has worked for New York-based hedge fund firm Fortress Financial Group LLC, is the first Democrat running for president to signal support for the legislation. Among Republicans, former New York Mayor Rudolph Giuliani has said he opposes raising the managers' taxes.

Hedge funds and private-equity firms have poured millions of dollars into lawmakers' campaign coffers. About two-thirds of campaign donations from employees of the biggest hedge funds and buyout firms last year went to Democrats, Federal Election Commission records show. Edwards received $182,250 in campaign contributions from employees of Fortress in the first quarter, making the hedge fund his biggest financial backer.

Edwards, who has called for rolling back President George W. Bush's tax cuts on the wealthy, wouldn't be pinned down on whether he supports proposals to dramatically increase the capital-gains rate, which was lowered from 20 percent to 15 percent in 2003.

``You have to do it in a way and establish a rate that doesn't cause capital to flee America,'' he said. ``We don't want the capital to go elsewhere.''

He said he's still studying the issue, though he agrees in principle with billionaire investor Warren Buffett -- the chairman of Omaha, Nebraska-based Berkshire Hathaway Inc. -- who said June 26 that the rich ``should not be taxed at a lower rate than the people who serve you at the deli.''

``I am trying to determine myself right now how you deal with that moral disconnect,'' Edwards said. ``I think it's there. I think it's real.''

Edwards said for now he's leaning toward a proposal to narrow the 20 percentage point gap between capital gains rates and those for wages, yet not close it altogether.

``I haven't made a final decision about it,'' he said.

The Senate Finance Committee will hold the first congressional hearing on the taxation of fund managers on July 11.

Legislation introduced in the House of Representatives last month would tax the share of profits that managers receive for investment services at ordinary income-tax rates as high as 35 percent and affect all partnerships, public and private. Currently, that income, known as ``carried interest,'' is taxed at capital-gains rates as low as 15 percent.

The House bill would also affect other partnerships, including those that invest in commercial real estate and oil and gas pipelines as well as venture-capital firms. The proposal is sponsored by House Ways and Means Committee Chairman Charles Rangel of New York and Financial Services Committee Chairman Barney Frank of Massachusetts.

To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net

Last Updated: July 5, 2007 18:17 EDT