More welfare - underserved
why on God's green earth do wealthy hedge-fund guysaverage compensation $2.2 millionneed tax relief? They ought to be paying more of a share, not less.
Even the term "carried interest" is a bit of a misnomer. The "interest" it refers to is not interest like on a savings account, but rather the share of profits that a hedge fund (or venture-capital firm, or private-equity firm) takes as its feeusually 20 percent. Effectively, hedge-fund managers mostly get paid on commission. Portfolio goes up, they get a share of that cut (plus their six- or seven- figure salary). Portfolio goes down, they still get paid for the assets they're overseeing.
Now, it is true that those portfolio gains are technically capital gainsprofits made from investmentsrather than salary. And in this country, if you make money from investments, you pay a much lower tax rate (the "capital gains rate") than if you make money from work.
But this is all BS.
First, that hedge-fund manager is working, no differently from his (yes, it is almost entirely "his") secretary, his dentist, and his own investment banker, all of whom pay regular income-tax rates. In exchange for researching investments and monitoring returns and the like, the fund manager is compensated. That's what the word "carry" in "carried interest" means: their pay.
Second, some of that "carry" is paid out regardless of profit or loss. Most hedge funds charge a fee equal to 2 percent of the total funds under management. Invest $10 million, they get $200,000 per year. Even if a profit share is a capital gain, surely this management fee isn't.
And yet because of the dynamics of legislative capture, any time Congress has tried to close the loopholePresident Obama pledged to do so in 2012, add Democrats tried in 2007a small group of very wealthy people have hired lobbyists, who have sprung into action to preserve it.
The Daily Beast
