Here's a question. We know that some Democrats are opposed to closing the "carried interest" tax loophole because hedge fund managers give a lot of money to Democrats. But so why don't Republicans try to embarrass the Chuck Schumers of the world by coming out against this loophole? Normally Republicans never miss a chance to do a favor to rich people, but most hedge fund money goes to Democrats so why not pull some jujitsu?
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Carried Interest and the GOP
16 Nov 2007 05:15 pm
Comments (20)
They don't want all the hedge fund money to go to the Democrats?
First, carried interest is an issue for private equity funds, not hedge funds. Second, it's more important to oppose a tax increase that would chase jobs overseas than it is to embarrass Chuck Schumer.
You mean why doesn't the GOP come out for raising taxes? Raising taxes on the rich no less?
I have a better question. Has an out space alien snatched MY's body and blog?
Al, November 12:
What interests me is the question of why Republicans are so adamantly against this [bill to close the carried interest loophole]. After all, the hedge fund managers who inordinately gain from the the loophole give overwhelmingly to Democrats. I mean, if I were a Republican in Congress, I would think about voting for the bill just to stick it to the hedge fund managers who love the Democrats so much.
Matthew today:
We know that some Democrats are opposed to closing the "carried interest" tax loophole because hedge fund managers give a lot of money to Democrats. But so why don't Republicans try to embarrass the Chuck Schumers of the world by coming out against this loophole?
I guess I'm ahead of the curve!
why don't Republicans try to embarrass the Chuck Schumers of the world by coming out against this loophole? Normally Republicans never miss a chance to do a favor to rich people, but most hedge fund money goes to Democrats so why not pull some jujitsu?
As ridiculous as this hypothetical is, even if the Republicans would dare to do that, wouldn't that just give cover to Schumer to vote the other way? Or give tacit approval for the rest of the dems to do so? This makes no sense.
1), republicans in general do not favor higher taxes
2) Schumer is looking like a hypocrite all on his own, and needs no extra help. In this kind of circumstance, the best political move is usually to just stay out of the way.
This whole thing strikes me as odd.
Why would a responsible Democrat be balking at having to pay their fair share instead of continuing to game the system?
And how could such big donors not know that economic inequality is a major part of the party platform?
I suppose it's just more of what we saw with Biden, the Blue Dogs, etc. bending over for the banking industry, but are there still really that many Dems in Senate and Congress who are beholden to the Hedge Fund industry?
And how could such big donors not know that economic inequality is a major part of the party platform?
Good one.
I guess my statement was a bit sloppy as written, it should say "how could such big donors not know that curbing economic inequality is a major part of the party platform?"
Because it isn't? I mean, I wish it was, but I don't see actual elected Democrats talking about it much, let alone acting on it.
. . . why don't Republicans try to embarrass the Chuck Schumers of the world by coming out against this loophole?
They signed a pledge.
"I guess my statement was a bit sloppy as written, it should say "how could such big donors not know that curbing economic inequality is a major part of the party platform?""
How would raising taxes on private equity funds curb income inequality? It would just drive more PE funds to London and offshore, and eliminate a lot of high-paid support jobs in the U.S. Political leaders should think of ways to attract more businesses and high-paying jobs to America, not ways to get rid of the ones we have. Spite isn't an effective economic policy.
republicans in general do not favor higher taxes
Actually, this wouldn't raise taxes, merely "close a loophole." And, as Reagan explained to us in 1986, "closing loopholes" is great tax policy.
Schumer is looking like a hypocrite all on his own
You're going to have to explain the hypocrisy here. There is a proposal to raise the taxes of PE managers, and Schumer is against it. Now, if Schumer were famous for railing against those who counted their income as capital gains for tax purposes, then he would be a hypocrite.
"but most hedge fund money goes to Democrats..."
And there you have it, in one simple phrase, what the once working class democratic party has become. See, the transformation from a party that once cared about working people to one that cares about stuff like gay marriage, illegal immigrants, feminism, abortion, etc. has made liberalism safe for rich people. And that's why a lot of Wall Street types give to democrats, because there's no longer any economic risk in doing so.
How would raising taxes on private equity funds curb income inequality? It would just drive more PE funds to London and offshore, and eliminate a lot of high-paid support jobs in the U.S. Political leaders should think of ways to attract more businesses and high-paying jobs to America, not ways to get rid of the ones we have. Spite isn't an effective economic policy.
That is pretty daft.
First, income inequality is beside the point. People who earn comparable incomes in other industries pay more than double (34% +) what the equity managers pay (16%). That's just plain inequitable.
And if asking those guys to pay the same tax on income that everyone else pays drives them offshore, well, those are the breaks. The current system is irrational and socially corrosive; it needs to be fixed.
It would just drive more PE funds to London and offshore, and eliminate a lot of high-paid support jobs in the U.S.
If you have the money to be playing in the PE sector and taxes on ROI are a major consideration you are don't know what the hell you are doing and you will lose all your money soon anyway. If I had a financial advisor that even brought up the subject I'd do what he said and sue him for malpractice after he shopped out an investment in Somalia because if it played out I'd get a couple points in tax advantage.
Southpaw,
Before you dismiss a comment as daft, you ought to make sure you know what you are talking about. Considering that you don't know what the relevant corporate and capital gains tax rates are, and considering your use of the word "people" (are you confusing/conflating corporate and individual tax rates?), it appears that you don't. If you want to do a little homework and then write something more coherent, I'll be happy to respond to it.
Ed Marshall,
Same goes for you. A little punctuation next time might help also.
Yeah, sorry Fred.
Please direct me to your broker who would direct me to this PE fund where people dump money into it and their huge concern is paying the taxes on gains. I hope such an idiot doesn't exist, but if he does it would be fun to sue the life out of him.
Go nuts, Fred. Try and get in that market and use your theory. Invest internationaly according to where you get taxed the least. You do believe in all of right?
What the hell, fred?
Carried InterestBecause the manager is compensated with a profits interest in the fund, the bulk of its income from the fund is taxed, not as compensation for services, but as a return on investment. Typically, when a partner receives a profits interest (commonly referred to as a "carried interest"), the partner is not taxed upon receipt, due to the difficulty of ascertaining the present value of an interest in future profits.[2] Instead, the partner is taxed as the partnership earns income. In the case of a hedge fund, this means that the partner defers taxation on the income that the hedge fund earns, which is typically ordinary income (or possibly short-term capital gains), due to the nature of the investments most hedge funds make. Private equity funds, however, typically invest on a longer horizon, with the result that income earned by the funds is long-term capital gain, taxable to individuals at a maximum 15% rate. Because the 20% profits share typically is the bulk of the manager’s compensation, and because this compensation can reach, in the case of the most successful funds, enormous figures, concern has been raised, both in Congress and in the media, that managers are taking advantage of tax loopholes to receive what is effectively a salary without paying the ordinary 35% marginal income tax rates that an average person would have to pay on such income. To address this concern, Congressman Sander M. Levin introduced H.R. 2834, which would eliminate the ability of persons performing investment adviser or similar services to partnerships to receive capital gains tax treatment on their income. However, the Treasury Department has suggested, both in testimony before the Senate Finance Committee and in public speaking engagements, that altering the tax treatment of a single industry raises tax policy concerns, and that changing the way partnerships in general are taxed is something that should only be done after careful consideration of the potential impact.
The controversy here is over a tax on natural persons, the partners who manage a private equity fund, for the portion of their compensation that consists of 20% (or whatever) of the fund's profits. The tax code characterizes that as a capital gain, and that's why those individuals get inequitable tax treatment.
It has nothing to do with corporate income taxation, nor is it particularly relevant to income inequality.
Forgive me for being off by one percentage point on my figures. But I really don't think that effects my point.
Comments closed November 30, 2007.
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Heads in the Sand
Because it would be RAISING TAXES! This is always a sin, no matter the provocation.
Another edition of simple answers . . .
Posted by Invigilator | November 16, 2007 5:37 PM