Posted on 09/22/2015 5:13:16 AM PDT by reaganaut1
The reality and the myths of taxing financial firms. Donald Trump has promised that he will ease burdens on the middle class by going after “the hedge-fund guys,” who, he believes, do not pay enough in taxes. “They’re making a tremendous amount of money — they have to pay taxes,” he says. 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 — but in any case, it is worth having a look at the reality and the myths of how hedge funds and other financial firms are taxed, assuming that we want to start with facts and proceed to opinion rather than go like a crab backward.
The myth is this: Hedge-fund managers take home tremendous paychecks that are really plain old payments for services but which are disguised as long-term capital gains, meaning that they get taxed at 15 percent rather than the 39.6 percent I pay on my salary, which is fundamentally unfair.
The thing about myths is, they’re myths.
(Excerpt) Read more at nationalreview.com ...
Riiiiiiiiiiiiiiiiiiight.
Gimmie a few specifics so that I can attack THEM and try to discredit the IDEA of tax reduction.
BAD trump. Bad bad bad.
Truth is, we have a crazily complex tax structure that should be extirpated root and branch.
AND IRS, AND EPA, AND “Education”..................etc.
I doubt that Trump is unaware of any shred of this.
But Trump knows how to simplify for the average listener, as well as to find a bit of solace for those, like some on FR, who can’t understand why corporate income tax reduction is anything but a sop to the rich.
Trump’s tax plan in his 2011 book has a maximum rate of 15%. So when it is enacted the hedge fund guys will pay the same as everyone else, but they won’t get a tax increase.
As conservative as I am on most issues, I am somewhat agnostic on this one. Carried interest is an outsized share of profit (disproportionately larger than the manager’s invested capital) in consideration for managing the fund. That sounds like salary — profit for work. It also takes the character of capital gain income if the underlying profit is capital gain in nature, so that does sound like people are getting capital gain treatment — reduced taxes — on their salary. The counter-argument is that this is profit, not salary, and is put at risk. There is no guaranty that the manager will earn it, and its subordinated to others getting their money back plus a return, so in that sense its not salary. But there are ways to mitigate that risk.
I think what the carried interest debate shows is that when you have an incredibly complex tax code, an army of lawyers can get you a better tax result.
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