Since late 2017, hedge fund managers have created numerous shell companies in the First State, corporate America’s favorite tax jurisdiction. These limited liability companies share a common goal: dodging new tax rules for carried-interest profits through a bit of deft legal paperwork.

Big names appear to be embracing the maneuver, which requires setting up LLCs for managers entitled to share carried-interest payouts. Four LLCs have been created under the name of Elliott Management Corp., the hedge-fund giant run by Paul Singer. More than 70 have been established under the names of executives at Starwood Capital Group Management, the private-equity shop headed by Barry Sternlicht.

President Donald Trump turned carried interest into a rallying cry during his populist presidential campaign, declaring that “hedge fund guys are getting away with murder.” Critics from billionaire Warren Buffett on down essentially agree, saying carried interest is a fee-for-service and should be taxed at the individual rate that today tops out at 37 percent. But money managers are eligible to pay a rate of about 20 percent, having successfully argued for years that carried interest, or their portion of investment returns, is a capital gain. […]