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.
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.