It’s tax time again, and again America’s richest financiers are breaking out the bubbly. Why? Because they pay less than you do!
The top hedge fund earners — who personally rake in billions (not millions) of dollars per year — can toast to the fact that they’re not living under that great radical president, Dwight David Eisenhower, when the top income tax rate was 91 percent, or under that rascal Dick Nixon when it was 70 percent. Nope, today, it’s a 15 percent maximum for the big boys, and we’re letting it happen.
In 2007 Congress took a serious look at closing what’s called the carried interest loophole–along with another loophole that allows hedge funds to defer taxes by shifting profits into offshore structures. But nothing happened due to heavy lobbying by the financial industry.
And for good reason. The top 25 hedge fund managers raked in more than $30 billion just for themselves in 2010 which represents two kinds of income. First, they get 2 percent of all the funds invested with them for “administrative” services involved in managing the funds. Mostly, that pays for their staff, office and trading costs. And then for their exquisite investment prowess, they get 20 percent of the profits. That’s their big bonanza.
The 2 percent is taxed as ordinary income subject to the top Bush-era tax rate of 35 percent. But the 20-percent-of-the-profits are taxed at 15 percent as if that income came from long-term capital gains. But it most certainly is not. Most hedge funds move their money at the speed of light. Long-term is a couple of minutes. So it has been obvious for years that this is just ordinary income for services rendered.
But these are not ordinary people. We’re talking real money. If this loophole were eliminated on the $1.9 trillion hedge fund industry, tax revenues from the richest of the rich would increase by at least $100 billion over the next decade. And the joke is they wouldn’t even notice. How could you if you’re pulling in $2.4 million an HOUR as the leading hedge fund manager did in 2010?
Continue reading this article at Alternet.
Les Leopold is the author of The Looting of America and The Man Who Hated Work and Loved Labor, both available now.