The complex and politically hazardous fight over whether taxes on the private equity industry should be increased to pay for tax relief for other Americans is unlikely to go away anytime soon.

The House on Friday approved the tax hike on private equity to pay for tax legislation shielding about 23 million Americans from paying the Alternative Minimum Tax (AMT), but the Senate, where friends of the industry include Democratic Senatorial Campaign Committee (DSCC) Chairman Charles Schumer (N.Y.), is not expected to take up the controversial issue anytime soon.

However, as they struggle over the policy in the aftermath of last week’s vote, lawmakers and K Street lobbyists alike can take comfort in a silver lining: The private equity and hedge fund industries are flush with cash, and will be using that money to write checks for campaigns and lobbying shop bills for some time to come in an effort to prevent those higher taxes from becoming law.

In fact, the silver lining is closer to a gold one, especially for Democrats.

According to the Center for Responsive Politics, employees of hedge funds gave $5.4 million to congressional candidates through September, with 79 percent of that total going to Democrats. The DSCC collected $695,500 from those industries in September, according to a Bloomberg News report.

Understandably, that puts senators like Schumer in a tough position. While shielding middle-class voters from the AMT is popular, it is also expensive. Under pay-go rules, spending must be cut or other taxes must be raised to make up for the AMT shortfall, and the hedge fund managers make a good target since increasing their taxes would provide an easy cash cow.

Such managers now pay a 15 percent capital gains rate on their pay, but would face much steeper tax bills with rates as high as 35 percent if their pay was calculated as ordinary income. Most people, whether they are school teachers, auto workers or federal government employees, pay their taxes on annual income.

Lobbyists are getting wealthier over the fight. So far, lobbying firms have collected $6.1 million from private equity firms and hedge funds, according to Bloomberg. That follows August’s eyebrow-raising news that the Blackstone Group, which is lobbying against the tax hike, paid Ogilvy Government Relations $3.74 million through the first six months of 2007.

That’s one of the largest single payments ever reported to a lobbying shop. To put the payment in perspective, in 2006, Blackstone reported a total of $240,000 in lobbying fees for the entire year.

This clout suggests the question of how to tax the private equity industry will be a political headache for some time. For the time being, it appears the only way the industry’s wealth will be spread is through its own invoices in Washington.