What Donald Trump Doesn’t Know about Hedge Funds: The reality and myths of taxing financial firms.

National Review ^ | 09/22/2015 | Kevin Williamson

[Rusty0604]

I can’t believe so many conservatives are falling for this populist rhetoric.

[Hawthorn]

>> So what do you believe in doing instead? <<

I believe in reading the articles, of course.

It's just that not many folks around here would seem to agree, especially on this thread.

[flaglady47]

“If you read the article it explains it in pretty simple terms that most people can understand.”

I didn’t ask for the article’s interpretation. I asked you specifically why you agree with it, for what reasons do you agree with it?

[hoosiermama]

Out with the old then in with the new

[SeekAndFind]

RE: But if it’s not a myth, why are the earnings of a hedge-fund manager treated different from the earnings of any other self-employed or service business?

__________________________________

Here’s Williamson’s explanation:

Hedge Funds ( AKA Private Equity firms ) don’t just bring money to the table: They bring (at least theoretically) expertise and labor, in exchange for which they are given a percentage of ownership or profits beyond that associated with the money they put up.

If they hold those investments for a year or more and there are profits realized, then they are taxed the same way you would be, i.e., at the 15 percent rate.

This is true even when they haven’t put up investment capital for that portion of the deal, but have instead put up what is sometimes called “sweat equity,” i.e., their work. If the deal goes south, then the private-equity investors will not necessarily have lost money on the management-fee portion of the deal, but they will have lost opportunity, time, effort, etc. And in most cases they will have lost money, too, especially in the case of venture capitalists, who much of the time will have put up practically all the investment capital in a startup.

The case against the carried-interest rule is, in short, that private-equity firms shouldn’t be allowed to treat investment income as a long-term capital gain in situations where they didn’t have money at risk.

*THAT* is the loophole that Trump is trying to close.

The counter argument made by Hedge fund managers is this — For private investors, investments are generally made out of income that already has been taxed: You pay 39 percent on your salary and, if you have the prudence to save some of that salary and invest it, you get taxed again on any money you make, and it strikes many people as sensible that the second bite be smaller than the first.

So, this in effect is DOUBLE TAXATION.

Kevin Williamson argues that this will only serve to discourage investments in innovation.

Hedge funds and other more exotic financial specimens do valuable work, too, although the benefits they provide (mainly risk mitigation) are less obvious to the general population. But it is the case that where certain kinds of income receive preferential tax treatment, firms and individuals will seek to organize their incomes in such a way as to benefit from those rules. Similarly, unless Washington should take the (unthinkably destructive) step of banning U.S. firms from having overseas subsidiaries and partnerships, the offshoring of profits for the purposes of shielding them from high U.S. corporate tax rates is inevitable.

[SeekAndFind]

RE: It’s just that not many folks around here would seem to agree, especially on this thread.

THAT is the purpose of posting the article in the first place — so that those who don’t agree can tell us their REASONS WHY they don’t.

There have been 65 posts in this thread and I find very little if any posts dealing with the content of the article itself.

All I see is because it disagrees with Trump, it therefore has to be bad, stupid or both.

[Georgia Girl 2]

Oh crikes not Kevin Williamson again. Fail.

[SeekAndFind]

RE: Go check out his first Trump hit-piece.

This thread is not about his other articles, it is about his critique of Trump’s hedge fund taxation proposal.

Let’s stick to that or we’ll be discussing something unrelated to the title of this thread.

[kcvl]

National Review columnist Kevin Williamson is so fed up with people using their cell phones during the theater-going experience that he physically removed a woman’s phone from her hands and threw it across a New York theater.

Here’s how it all went down.

The play was high brow — “Natasha, Pierre, and the Great Comet of 1812” — but the audience apparently was not.

“The main offenders were two parties of women of a certain age, the sad sort with too much makeup and too-high heels, and insufficient attention span for following a two-hour musical,” Williamson writes in his post “Theater Night: Vigilantes 1, Vulgarians 0.”

When one particular woman “with too much makeup” refused to get off her phone after Williamson and his date had kindly asked her to turn it off, she suggested he mind his own business.

Here’s what happened next, writes Williamson:

So I minded my own business by utilizing my famously feline agility to deftly snatch the phone out of her hand and toss it across the room, where it would do no more damage. She slapped me and stormed away to seek managerial succor. Eventually, I was visited by a black-suited agent of order, who asked whether he might have a word.

In a civilized world, I would have received a commendation of some sort. To the theater-going public of New York — nay, the the world – I say: “You’re welcome.”

http://www.businessinsider.com/kevin-williamson-throws-womans-phone-across-theater-2013-5

[kcvl]

He is also the theater critic for The New Criterion. He was previously deputy managing editor at National Review

Williamson previously worked at the Mumbai-based Indian Express Group, the Lubbock Avalanche-Journal, Journal Register Newspapers, and the Institute for Humane Studies at George Mason University, where he directed the journalism and communication programs, and as an adjunct professor at The King's College.

Williamson was the editor of The Bulletin, a former daily newspaper in Philadelphia.

[lewislynn]

The counter argument made by Hedge fund managers is this — For private investors, investments are generally made out of income that already has been taxed: You pay 39 percent on your salary and, if you have the prudence to save some of that salary and invest it, you get taxed again on any money you make, and it strikes many people as sensible that the second bite be smaller than the first.

How is that different from buying stocks with after tax income?

Hedge funds and other more exotic financial specimens do valuable work, too...

I'm self-employed, I do valuable work too, I want the same treatment.

Either I get the same treatment they get or they get the same treatment I get...

It's no more complicated than that.

[kcvl]

“I highly recommend Kevin Williamson of National Review read Buckley’s Mission Statement from 1955 in light of his recent writings at that publication about the base of the Republican Party in a piece out last week titled, “WHINOS: On the Martyrdom of the Holy, Holy Base.” Aside from Williamson’s previous writings opining on the entrance of Donald Trump into the Republican field of presidential wannabes, (he’s really got a hate-on for Trump) he has crossed a substantial line in conservative thought and manner when, exasperated that Trump is appealing to the base a full year before it really matters, takes his frustration out on the base; the conservative, patriotic, regulars of a Republican Party army who feel they are being ignored.”

“Without arguing for or against Trump, it is obvious that he is actually speaking to the base of the party, something Jeb Bush said he would never do, stating that Republicans no longer need to make a point and that they should lose the primary, both irrational arguments unless you realize he wants the base disengaged, and preferably exiled. Both, by the way, can be achieved when the race includes 175 hopefuls, or whatever the number is this week, with every stripe and flavor forcefully fought for before the primaries are finished.”
https://www.conservativereview.com/Commentary/2015/07/national-reviews-williamson-in-over-the-top-screed-against-base#sthash.jq4zlPHZ.dpuf

[SeekAndFind]

RE: I’m self-employed, I do valuable work too, I want the same treatment.

Well, that’s NOT argument to increase taxes on hedge fund managers but argument to make tax simpler and flatter.

And that is what Kevin Williamson is arguing for.

He said:

“It is useful to meditate on that sky-high U.S. corporate tax rate. On paper, it is, as noted above, the world’s highest; in reality, most U.S. firms, especially large and politically connected firms, pay a lot less than the official rate. That’s partly because the U.S. tax code is larded with political favoritism, and partly because companies engage in other forms of tax minimization.”

People who write the tax code aren’t as smart or as motivated as the people who have billions of dollars at stake reacting to it. You can jack up the tax rate on investments to whatever you like — that doesn’t mean that anybody is going to pay it. But don’t call it a “loophole.” This isn’t an unintended feature of the tax code. The tax code was written the way it was for a reason. Maybe you don’t think that it’s a good reason, but it isn’t an accident. And there are no special rules for hedge funds or private-equity companies — they play by the same rules the rest of us do, even if they’re better at it.

[Jane Long]

National Review has become a GOPe hack outfit and I refuse to read anything from them. They have been outed...but to each his own

*******

The article may be spot on but NR is so pro-Jeb and anti-Trump that I also no longer trust their views. There was proof enough of that when Rich Lowry lambasted Trump on Megyn Kelly’s show last night. Watch out for this guy.

---

Agree...National Review is now RINO Review. I watched the video of that RiNO Lowry, on Mehgyn’s show.....Trump’s guy, Stone, gave Rich a good smack down...to which Lowry showed his colors.

Here’s the vid, from last night, if anyone cares to watch Lowry/Kelly try to take down Trump...

https://www.youtube.com/watch?v=y92EXWQ5MFY&feature=youtu.be

[Cold Heat]

Taxing long term capital gains, or long term carried interest at short term rates will get you less investment and more chaotic investment..

In fact, small investors, or sometimes called Mom and Pops, would have little or no incentives to even participate if their meager long term gains (one year or more) were taxed as short term standard rate income. Larger investors with millions of dollars invested would have absolutely no reason to hold those investments because there would be no incentive to do so.

In short, you would turn the entire market stability upside down and turn everyone into Day Traders!

Talk about volatility!

Lol...We would look just like China’s market. Totally non functional.

The author is right. It appears to me that trump does not fully comprehend the issue and is using it IN THE SAME WAY that liberals do, and that is to make a senseless “fairness “ argument when in fact, there are reasons we do it that way to encourage investment capital to flow in a stable way by incentives to hold investments for at least one year or more..

[odawg]

From article:

“Because the one thing in which Trump is consistent is his vagueness, it is not 100 percent clear whether what he is talking about is the so-called carried-interest loophole, which is very much on the minds of people with economic-policy views similar to Trump’s — meaning Bernie Sanders and Hillary Rodham Clinton and other cookie-cutter progressives...”

I don’t have the time at this moment to read the article, if I ever do. However, randomly:

1. From the quote, it appears that his attempt will be to smear Trump when he places him in the same company with Sanders and Clinton, who are repulsive people.

2. Trump’s consistent vagueness. As per the article, I have heard him refer to carried-interest loopholes. But, do you really think that it would be wise for Trump to digress into a subject matter that it takes a long article with many hours of research to roll out? And, also, repeat it in depth ever time the subject comes up?

3. Trump’s consistent vagueness, part II. What is vague about building a fence on the border, deportation of illegals, building up the military, repairing trade deals, etc.

4. Trump’s vagueness, part III. This kind of beginning should alert anyone that the emphasis is more on rolling Trump than delivering knowledge on hedge funds.

4. Trump’s vagueness, part IV. I think that it is safe to assume that Trump knows that most people think there is plenty of chicanery going on in high finance, otherwise, we would not be in such dire straits, as most experts are claiming.

I have just talked myself out of reading the article.

[SeekAndFind]

RE: From the quote, it appears that his attempt will be to smear Trump when he places him in the same company with Sanders and Clinton, who are repulsive people.

I think the attempt is to show that Trump’s tax policy ( at least when it comes to the very wealthy ) is quite similar to Hillary and Sanders, which is to add more “fairness” to the code.

It is NOT an attempt to say that Trump’s politics and policies are equal in all respects to Hillary’s or Sanders’.

People who love Trump might call it a smear. I call it an observation that one cannot help but make.

[Cold Heat]

I call it an observation that one cannot help but make.

Exactly!.....But it's only one of several that can be made..

We still have a lot of time to peruse present and past policy statements, and I suggest that we vet each and every candidate.

Right now, it appears to me that many are watching the shiny objects and ignoring a great deal of information.

[odawg]

“I think the attempt is to show that Trump’s tax policy ( at least when it comes to the very wealthy ) is quite similar to Hillary and Sanders, which is to add more “fairness” to the code.”

Williamson referenced “economic-policy views” and “cookie-cutter progressives” when he mentioned Sanders and Clinton, and that involves much more than just taxes. He then goes from the general smear to specifics on taxes.

[Rusty0604]

LOL, I’m not going to give finance 101 lessons. We need less burdensome taxes for everyone to encourage investment and innovation. We don’t need to penalize those people that do take those risks just because, like Obama says, “at some point you’ve made enough money”. And we don’t need to tax certain groups of people differently for long term investments just because they make more money doing it.