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Sunday, May 23, 2010

"Closing Tax Loopholes For Billionaires"

What are the chances that the deficit hawks will come out in favor of this?:

The Challenge of Closing Tax Loopholes For Billionaires, by Robert Reich: Who could be opposed to closing a tax loophole that allows hedge-fund and private equity managers to treat their earnings as capital gains – and pay a rate of only 15 percent rather than the 35 percent applied to ordinary income?
Answer: Some of the nation’s most prominent and wealthiest private asset managers, such as Paul Allen and Henry Kravis, who, along with hordes of lobbyists, are determined to keep the loophole wide open.
 
The House has already tried three times to close it only to have the Senate cave in because of campaign donations from these and other financiers who benefit from it.
 
But the measure will be brought up again in the next few weeks, and this time the result could be different. Few senators want to be overtly seen as favoring Wall Street. And tax revenues are needed to help pay for extensions of popular tax cuts, such as the college tax credit that reduces college costs for tens of thousands of poor and middle class families. Closing this particular loophole would net some $20 billion.
 
It’s not as if these investment fund managers are worth a $20 billion subsidy. Nonetheless they argue that if they have to pay at the normal rate they’ll be discouraged from investing in innovative companies and startups. But if such investments are worthwhile they shouldn’t need to be subsidized. ...
Nor are these fund managers especially deserving, as compared to poor and middle-class families that need a tax break to send their kids to college. ...
Several of these private investment fund managers, by the way, have taken a lead in the national drive to cut the federal budget deficit. The senior chairman and co-founder of the Blackstone Group, one of the largest private equity funds, is Peter G. Peterson... Curiously, I have not heard Peterson advocate closing this tax loophole as one way to further the cause of fiscal responsibility. 
Closing tax loopholes for billionaires may seem like a no-brainer... But you can expect a huge fight.
There is also a moral issue here. Call me old fashioned but I just think it’s wrong that a single hedge fund manager earns a billion dollars, when a billion dollars would pay the salaries of about 20,000 teachers.

    Posted by on Sunday, May 23, 2010 at 02:26 PM in Economics, Taxes | Permalink  Comments (32)


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