You support President Obamas proposal to increase taxes on the wealthy? That was the question put to George Soros on CNN some three years ago. Here was his answer:
Yes, very much the super bubble really resulted in creating a great increase in inequality, and now we have the after effect where you have slow growth, but if you could have better distribution of income, then the average American would actually be better off.
Theres no question that everyday Americans (as a reminder, those are the people Hillary Clinton wants to help by running for president well, those people and perhaps a few foreign governments and any investment bank who is willing to pay her husband six figures for a speech) would be better off if they got a larger piece of the pie, but as weve seen over the past several months, thats not likely to happen as wage growth declines for the 80% of American workers classified by the BLS as non-supervisory even as the countrys supervisors see their pay increase, and as Fed policy continues to inflate the assets most likely to be concentrated in the hands of the wealthy. As this sad reality continues to play itself out destroying the American Middle Class in the process, we wondered if Soros was doing his best to ameliorate the situation by redistributing more of his vast wealth to the very same average Americans about which he expressed so much concern in 2012. The short answer: no.
Via Bloomberg:
George Soros likes to say the rich should pay more taxes. A substantial part of his wealth, though, comes from delaying them. While building a record as one of the worlds greatest investors, the 84-year-old billionaire used a loophole that allowed him to defer taxes on fees paid by clients and reinvest them in his fund, where they continued to grow tax-free. At the end of 2013, Sorosthrough Soros Fund Managementhad amassed $13.3 billion through the use of deferrals, according to Irish regulatory filings by Soros
Congress closed the loophole in 2008 and ordered hedge fund managers who used it to pay the accumulated taxes by 2017. A New York-based money manager such as Soros would be subject to a federal rate of 39.6 percent, combined state and city levies totaling 12 percent, and an additional 3.8 percent tax on investment income to pay for Obamacare, according to Andrew Needham, a tax partner at Cravath, Swaine & Moore. Applying those rates to Soross deferred income would create a tax bill of $6.7 billion
When Soros founded his firm, nothing in U.S. law prevented money managers from postponing the acceptance of client fees and letting the money remain in their funds, where it could grow untaxed. But doing so wasnt really an option for funds based in the U.S., because if managers didnt take the fees, their clients wouldnt be able to deduct them from their own taxable income.
Hedge fund managers could circumvent this obstacle by setting up parallel offshore funds for investors who werent subject to U.S. taxes and who therefore didnt care whether their fund manager deferred taxes on the fees. That way, the feestypically 2 percent of the amount invested and 20 percent of any profitsplus any investment gains, could grow without being taxed until the managers withdrew the money
A manager with Soross track record who started with $12 million from investors, took 20 percent of the profits, and reinvested that money tax-free over 40 years, would end up with $15.9 billion. If that same manager paid federal, state, and local taxes on the fees and related investment gains before reinvesting them, the figure would shrink to $2.4 billion
Heres the simple math:
In the end, it would appear that we simply have yet another case of billionaire hypocrisy: "please raise taxes on all the uber-wealthy... except me."