Which Republican will defend Hedge fund tax exemptions

[Sactowndog]

1. dividends need to be taxed as ordinary income. Short-sales and derivatives and commodities, and options need to be taxed at even higher/punitive rates.

2. Hedge fund managers need to be taxed at ordinary income rates. They aren't even investing their own money. PLUS Wall, Street needs to have a transaction tax. The object is to provide long-term capital for companies to use to create jobs.

Here is where I think Liberals are wrong....

Corporate income taxes need to be eliminated. This approach will allow US small businesses to grow via their own capital without having to pay income taxes. This also takes care of the double income problem since the tax on dividends would be the first tax...

All returns whether to labor or capital via capital gains or dividends should be taxed at regular income rates. It enables us to collect taxes from local residents getting their return from overseas investiments with no US job impact. It would also slow the cycle of acquiring companies and off-shoring local workers.

Lastly, we should tax net capital outflows by 20%. If a business is exporting capital then they should pay a tax on it. Earn 10B in US revenue and spend or invest 10B in the US and you pay no taxes. Export 2B in capital to China then you pay 20% on the capital export. This would keep capital in the US, keep interest rates lower and increase jobs.

 

[Sactowndog]

I disagree. We need more "Velocity" of money. More velocity of money = more economic activity= more economic expansion = more jobs = greater tax base= increased tax revenue. What you are suggesting would slow investment, slow growth, slow innovation, increase dependency.

The transaction tax yes would slow money but Hedge funds?

Also not taxing dividends don't do us any good if the dividends come from non-US companies. Not only do we have to increase the velocity of money but we have to encourage that money to stay on-shore. It is the second point you are missing and it is vitally critical in today's economy.

 

[Sactowndog]

We disagree. You are 100% right that I want to slow the "velocity" of "investment". I want long-term capital invested, not overseas investment/derivatives/options/commodities/short-sales that raise ZERO capital.

I want a tax system that rewards long-term investment that can raise capital and create jobs, not fast paced computer trades in the global casino. Tax the crap out of anything that doesn't create jobs.

You are both right the velocity of capital is important but keeping ti on-shore is equally important.

I really think the answer is eliminating corporate income taxes and raising capital gains taxes. It basically makes companies into 401K's. The longer the income stays in the company compounding tax free the better for the investor. Tax income at zero and capital gains at the level of income and the capital will stay in the business longer.

The side benefit is people like Hedge fund managers can no longer play games.

 

[Zander]

You do know that the current capital gains rate is 15% right? It is 5% lower than any other time since WW2.

Labor unions generally are a larger group although at the rate they have been declining you could argue the opposite. At some point you slip from laws to bribary. Again at the point your tax is actully regressive I think you have moved from conservative to facist.

In terms of dividends, I agree but the answer is not to lower the capital gains tax since people can invest anywhere globally. Meaning I could invest overseas, consume government services in the US and not have a dime of taxes go to the govermment to pay for those services. The answer is to lower or eliminate corporate income taxes for US income.

Long term cap gains are taxed at 15% and go to 20% next year. Short term cap gains are taxes as ordinary income.

 

[Sactowndog]

Long term cap gains are taxed at 15% and go to 20% next year. Short term cap gains are taxes as ordinary income.

Maybe clearly the Republicans hope to extend the 15% rate and some even want to elimate Capital gains tax altogether.

 

[kyzr]

Maybe clearly the Republicans hope to extend the 15% rate and some even want to eliminate Capital gains tax altogether.

The key is lowering Corporate rates to be competitive and get that overseas capital invested back here.

 

[Toro]

Okay one of the revenue enhancements in the gang of 6 plan rejected by Republicans is related to hedge funds managers.

Currently hedge fund managers get paid two ways. They take a 2% administration fee off the top. This fee is typically taxed as income. The other fee is they charge 20% of profits. This 20% often makes up the bulk of their income. The 20% is taxed at the 15% capital gains rate and not the 33% marginal tax rate for income.

The intent of the reduced capital gains tax is to encourage investors to undertake more risky investments. Hedge fund managers are getting this rate for managing other peoples money not for risking their own.

The House Republicans will preserving the undeserved tax break at any cost. Will any Republican defend this position?

Undeserved? How is getting taxed on Capital Gains undeserved, Komrade?

They aren't getting taxed on capital gains. They are getting taxed at the capital gains rate for providing a service. It is egregious and should be ended immediately.

 

[Toro]

Okay one of the revenue enhancements in the gang of 6 plan rejected by Republicans is related to hedge funds managers.

Currently hedge fund managers get paid two ways. They take a 2% administration fee off the top. This fee is typically taxed as income. The other fee is they charge 20% of profits. This 20% often makes up the bulk of their income. The 20% is taxed at the 15% capital gains rate and not the 33% marginal tax rate for income.

The intent of the reduced capital gains tax is to encourage investors to undertake more risky investments. Hedge fund managers are getting this rate for managing other peoples money not for risking their own.

The House Republicans will preserving the undeserved tax break at any cost. Will any Republican defend this position?

Are you aware that this tax increase would affect more than just hedge fund managers? Or does your class warfare rhetoric forget the fact that people who make less than $100,000 grand also benefit from this particular tax non exemption?

Who else would it affect? Private equity fund managers? If so, that's good too.

 

[CrusaderFrank]

Okay one of the revenue enhancements in the gang of 6 plan rejected by Republicans is related to hedge funds managers.

Currently hedge fund managers get paid two ways. They take a 2% administration fee off the top. This fee is typically taxed as income. The other fee is they charge 20% of profits. This 20% often makes up the bulk of their income. The 20% is taxed at the 15% capital gains rate and not the 33% marginal tax rate for income.

The intent of the reduced capital gains tax is to encourage investors to undertake more risky investments. Hedge fund managers are getting this rate for managing other peoples money not for risking their own.

The House Republicans will preserving the undeserved tax break at any cost. Will any Republican defend this position?

Undeserved? How is getting taxed on Capital Gains undeserved, Komrade?

They aren't getting taxed on capital gains. They are getting taxed at the capital gains rate for providing a service. It is egregious and should be ended immediately.

That's a distinction without a difference. The profits are from capital gains.

 

[Toro]

If I understand it correctly, capital gains is the result of liquidating an asset- which may or may not be liquidated at a profit. Additionally, a capital gain may or may not be a tax preference item.

Income is just income.

Honestly I don't think you know what the fuck you're talking about.

Point is, why should that income be taxed less than the income made on a regular job?

Fair question.

If you, an elderly solid aggregate, should take the proceeds from your regular job and use them to embark upon a financial endeavor that involves spending those very same funds in the pursuit of generating yet more income- then the act of that spending will fall into various categories depending upon IRS regulations. The deductibility of those expenditures are treated differently depending on the nature of the transaction.

Selling something such as your properties creates a taxable event. You may realize a gain, you may suffer a loss. That gain or loss is effected by the basis or your original investment. The "basis" is determined by whatever improvements (or expenses) you have made or incurred during the course of owning that asset.

Hedge fund managers may take that 2% "off the top" without lifting a finger. Yet, they do in fact have expenses such as office, administrative, overhead, etc. So let's give them that deduction as an ordinary expense.

If, (assuming the OP ain't talking out his ass) these same hedge fund managers charge 20% of profits then that particular income is taxed differently because there does exist a certain element of risk. The risk is- there may very well NOT be a profit from which they can make their charge.

And like I stated earlier- these same managers often bear the brunt of losses.

So there's the rub- that 15% capital gains rate as opposed to the 33% marginal tax rate of income.

Does that make sense? I hope it does becuse I just spent 40 minutes typing this shit.

He knows what he is talking about.

Hedge fund managers and private equity managers are paid two ways. They receive a fee known as a management fee. That is typically 1% to 2% of total assets under management. It is generally used to pay expenses. So a hedge fund manager who has raised $1 billion from other people and charges a 2% management fee will receive $20 million, and he will use that to pay expenses such as salaries, overhead, etc. Any profits derived from this management fee are taxed at either the income or corporate tax rate, depending on the structure. Most hedge funds are general partnerships.

The other part - the "carried interest" or profit allocation - is generally a 20% fee on profits generated by the hedge fund manager. This is pure profit. So if our hedge fund manager who has raised $1 billion from other people generates a 20% return, he will receive carried interest profits of $40 million. The hedge fund manager will pay a rate of 15% on that $40 million.

Now, understand what is happening here: The hedge fund manager has taken other people's money and is being taxed at a rate as if it were his own money. Most people would call that a "fee." In fact, in the hedge fund community, these are called exactly that, "fees." But because politicians are generally a.) stupid, and b.) craven, they changed the tax laws which said that profits from managing other people's money should be taxed as if it were your own.

That is fucking retarded.

And I say that having worked in the hedge fund community.

People who argue that this is fair are sooooooooooooooo stupid.

If I do any other activity which requires a fee be paid, I am taxed at rates that are not capital gains tax rates. Let's say I create a new whiz bang gadget that everyone loves and make $40 million, I am taxed at a higher rate than the hedge fund manager. IOW, we reward speculation over production. That is bizarre, and is a great example of why this economy is so fucked up, given how important asset speculation and the financialization of America has become.

The other joke that the really stupid people who support this don't realize is that capital gains tax rates apply only if the capital asset is held for more than a year. If the capital asset is held for less than a year, the tax rate is the marginal rate of income. But ... BUT ... if the hedge fund manager holds it for less than a year, he is taxed at the capital gains tax rate. IOW, if you buy and sell Microsoft stock within six months and make a profit, you are taxed at the marginal rate. But if the hedge fund manager does the exact same thing, he is taxed at the capital gains rate. Fair, huh?

In our example, the gains that the investors who gave the $1 billion to the hedge fund manager should be taxed at the capital gains rate. And if the hedge fund has his own money in the fund, that should also be taxed at the capital gains rate. But any profits that the hedge fund manager makes managing other people's money is no different than a fee or commission paid to any other individual in any other profession, and he should be taxed accordingly, not given preference because he is engaged in speculation.

 

[Toro]

That's a distinction without a difference. The profits are from capital gains.

BFD if it is on capital gains. You are getting paid for performance managing other people's money. It is a HUGE difference. If I charge my fund $100 million in management fees but take $0 in carried interest, there is absolutely no economic difference than if I charge my fund $0 in management fees and take $100 million in carried interest. Yet I am taxed at a lower rate on the latter than the former. You get paid a fee for managing other people's money, no matter what the outcome.

If I am an agent for a football player or a movie star and get a 10% cut, and negotiate a $100 million deal instead of a $10 million deal, I have "added value" for my client. Why should the hedge fund manager receive preference? If I am a real estate agent and get a really high price selling my client's building, why is my commission taxed at a different rate than the fees paid to a hedge fund manager? If I am a consultant and management has implemented my "Total Quality Management" process, netting them an extra $100 million in value, whatever my fee is, I pay a higher rate than the capital gains tax charged the hedge fund manager. Why? There is no economic difference.

Taxing carried interest distorts economic activity by encouraging speculation by giving preference to speculators on fees paid over production.

 

[Toro]

Okay one of the revenue enhancements in the gang of 6 plan rejected by Republicans is related to hedge funds managers.

Currently hedge fund managers get paid two ways. They take a 2% administration fee off the top. This fee is typically taxed as income. The other fee is they charge 20% of profits. This 20% often makes up the bulk of their income. The 20% is taxed at the 15% capital gains rate and not the 33% marginal tax rate for income.

The intent of the reduced capital gains tax is to encourage investors to undertake more risky investments. Hedge fund managers are getting this rate for managing other peoples money not for risking their own.

The House Republicans will preserving the undeserved tax break at any cost. Will any Republican defend this position?

Undeserved? How is getting taxed on Capital Gains undeserved, Komrade?

Because it is not being taxed on capital gains. It is a performance fee for managing other people's money. The other people get taxed on capital gains. The manager should be taxed as any other fee income.

 

[Toro]

1. dividends need to be taxed as ordinary income. Short-sales and derivatives and commodities, and options need to be taxed at even higher/punitive rates.

2. Hedge fund managers need to be taxed at ordinary income rates. They aren't even investing their own money. PLUS Wall, Street needs to have a transaction tax. The object is to provide long-term capital for companies to use to create jobs.

Hedge fund managers should be taxed no differently than anyone else. However, I disagree with a transaction tax. I think that's a bad idea.

 

[rdean]

Okay one of the revenue enhancements in the gang of 6 plan rejected by Republicans is related to hedge funds managers.

Currently hedge fund managers get paid two ways. They take a 2% administration fee off the top. This fee is typically taxed as income. The other fee is they charge 20% of profits. This 20% often makes up the bulk of their income. The 20% is taxed at the 15% capital gains rate and not the 33% marginal tax rate for income.

The intent of the reduced capital gains tax is to encourage investors to undertake more risky investments. Hedge fund managers are getting this rate for managing other peoples money not for risking their own.

The House Republicans will preserving the undeserved tax break at any cost. Will any Republican defend this position?

All of them and most of the base.

 

[Sactowndog]

Maybe clearly the Republicans hope to extend the 15% rate and some even want to eliminate Capital gains tax altogether.

The key is lowering Corporate rates to be competitive and get that overseas capital invested back here.

I would agree but with revenue at 14.9% and a 1.2T debt we can't afford the revenue loss. So we need to raise the capital gains which will have minimum negative impact since a portion of the capital is invested overseas.

I would also add a tax on net revenue transferred out of the country that will keep some of the capital here instead of transfered out.

 

[Sactowndog]

They aren't getting taxed on capital gains. They are getting taxed at the capital gains rate for providing a service. It is egregious and should be ended immediately.

No it is politics. What is egregious is Republicans had the opportunity to reform entitlements and really address the deficit in exchange for ending stuff like this sham. Instead they chose to pass a symbolic bill in the House.

For a group that claims to care about the deficit.... that is truely egregious.

Toro glad to see you in the thread......

 

[Quantum Windbag]

Okay one of the revenue enhancements in the gang of 6 plan rejected by Republicans is related to hedge funds managers.

Currently hedge fund managers get paid two ways. They take a 2% administration fee off the top. This fee is typically taxed as income. The other fee is they charge 20% of profits. This 20% often makes up the bulk of their income. The 20% is taxed at the 15% capital gains rate and not the 33% marginal tax rate for income.

The intent of the reduced capital gains tax is to encourage investors to undertake more risky investments. Hedge fund managers are getting this rate for managing other peoples money not for risking their own.

The House Republicans will preserving the undeserved tax break at any cost. Will any Republican defend this position?

Are you aware that this tax increase would affect more than just hedge fund managers? Or does your class warfare rhetoric forget the fact that people who make less than $100,000 grand also benefit from this particular tax non exemption?

Who else would it affect? Private equity fund managers? If so, that's good too.

It would affect everyone who carries interest on any investment, which is why it is called a carried interest exemption. Hedge fund managers taking advantage of the loophole is certainly egregious on its face, but it is not the fault of the exemption, and any reformation of it could affect small investors in the stock market.

Before you get huffy, I know most small investors do not carry their interest over, but they do have that option, and I see no reason to penalize them if they elect to exercise it.

 

[Quantum Windbag]

1. dividends need to be taxed as ordinary income. Short-sales and derivatives and commodities, and options need to be taxed at even higher/punitive rates.

2. Hedge fund managers need to be taxed at ordinary income rates. They aren't even investing their own money. PLUS Wall, Street needs to have a transaction tax. The object is to provide long-term capital for companies to use to create jobs.

Hedge fund managers should be taxed no differently than anyone else. However, I disagree with a transaction tax. I think that's a bad idea.

You want a fair tax vertically, but want it to be unfair horizontally. What do you have against people that are smart enough to live on the edge and make a profit off of it?

 

[Sactowndog]

Are you aware that this tax increase would affect more than just hedge fund managers? Or does your class warfare rhetoric forget the fact that people who make less than $100,000 grand also benefit from this particular tax non exemption?

Who else would it affect? Private equity fund managers? If so, that's good too.

It would affect everyone who carries interest on any investment, which is why it is called a carried interest exemption. Hedge fund managers taking advantage of the loophole is certainly egregious on its face, but it is not the fault of the exemption, and any reformation of it could affect small investors in the stock market.

Before you get huffy, I know most small investors do not carry their interest over, but they do have that option, and I see no reason to penalize them if they elect to exercise it.

Interesting so explain the exception an how you would address the use by Hedge fund managers.

 

[Toro]

Are you aware that this tax increase would affect more than just hedge fund managers? Or does your class warfare rhetoric forget the fact that people who make less than $100,000 grand also benefit from this particular tax non exemption?

Who else would it affect? Private equity fund managers? If so, that's good too.

It would affect everyone who carries interest on any investment, which is why it is called a carried interest exemption. Hedge fund managers taking advantage of the loophole is certainly egregious on its face, but it is not the fault of the exemption, and any reformation of it could affect small investors in the stock market.

Before you get huffy, I know most small investors do not carry their interest over, but they do have that option, and I see no reason to penalize them if they elect to exercise it.

It doesn't matter if the investor is small or large. The manager is getting paid a performance fee for a service. The exemption distorts economic activity by encouraging speculation at the expense of everything else. It should be ended immediately.