I really, really hate the “carried interest” loophole that lets the ordinary income of hedge fund and private equity guys get taxed at the lower rate for capital gains. Right now the top rate for ordinary income is 39%, and only 20% for capital gains, so we’re talking real money. The top 25 hedge fund managers made more than $24 billion in 2013.
I always thought that Congress gaveth that loophole and Congress would have to taketh it away.
But nooooo! As David Lebedoff writes at Slate*, the IRS issued a ruling in 1993, before hedge funds existed, that was intended to apply to real estate investments. Congress never voted on it. When hedge funds arrived on the scene, the IRS applied this ruling to them. But President Obama could — right now, today, before his bedtime in Europe! — tell the IRS to stop doing that.
Looking for a real IRS scandal? This is it.
* “Why Doesn’t Obama End the Hedge Fund Tax Break?”
All of us have our pet peeves, and one of mine is the “carried interest” loophole, which lets those who get their income from venture capital, private equity, hedge funds, and real estate limited partnerships pay their taxes at capital gains rates (20%) rather than ordinary income rates (39.6%).
With about 1.3 million people (plus the people who depend on them) losing their unemployment benefits as of today, I went back to check what carried interest costs the Treasury, to see if it would have covered extending those benefits for three months.
Carried interest costs the government between $11 and 13 billion a year*, while the unemployment benefits would have cost $6 billion.
So score one for the caviar and Champagne crowd, and nothing for the Ramen noodle and tap water crowd.
See “A Costly and Unjust Perk for Financiers,” Lynn Forester de Rothschild, NYT, February 24, 2013
Mitt and the GOP keep scaring people by saying that we are like Greece. If that’s true, why is it that the U. S. can borrow for ten years for less than 1.75%. Greece can’t borrow at all except from bailout funds and some very high-flying hedge funds. Meanwhile, Spain is paying more than 6% to borrow for ten years, and Italy is paying 5.6%.
The rest of the world has much more confidence in us than our own Republican party. Yet they say Obama is “un-American.”