Posted on 09/07/2015 7:15:07 AM PDT by expat_panama
...Taxing carried interest as ordinary income is a really dumb idea. The title is just being polite.
It makes no sense as a matter of tax policy. It makes no sense if your goal is to soak the rich. It makes no sense if you want to raise money for tax reform. It is the triumph of feelings over thinking, and emotion over reason. It is borne of impassioned ignorance combined with a singular stupidity. It’s populism at its worst and ugliest.
[snip] How does this expert investor get compensated? Usually by something called “two and twenty.”
The “two” stands for the management fee/W-2 salary the investor gets for his labor–his paychecks equal two percent of the assets he is managing. Like any other wage, it’s subject to ordinary income tax and payroll taxes.
The “twenty” stands for the expert investor’s share of the capital gain he obtains for the limited partners. He keeps twenty percent of the capital gains he accrues (above and beyond the original investment), and the remaining eighty percent is left for the limited partner investors–those colleges, charities, and pensions mentioned earlier.
The investor expert’s share of the capital gain is known in the industry as his “carry.” Like any other capital gain, it’s subject to capital gains tax.
[snip]
Taxing Carried Interest As Ordinary Income Is Bad Tax Policy
[snip]
Taxing Carried Interest As Ordinary Income Won’t Raise Money for Tax Reform
[snip]
A Bad Idea Whose Time Has Not Come
Raising capital gains taxes is a bad idea. Doing so because you don’t like the recipients of a certain type of capital gain is a worse one. Donald Trump and the other Republicans running for president should think twice before pandering to this hard Left demagoguery talking point.
(Excerpt) Read more at forbes.com ...
Vote for Trump, get a Justice Kennedy in the White House.
Vote for Cruz, get a Justice Scalia.
You pick.
Happy day off for "work" day! OK, so the markets (U.S. at least) are closed but this piece really caught my eye and even though I really try keep this pinglist from being too high a volume I thot the investing/tax implications were useful. Long read, tried to edit it right, enjoy!
Cruz is a terrible campaigner. Until he fixes that he has no chance. For me he is a little to coy on a path to citizenship for illegals.
http://www.americanthinker.com/articles/2015/03/senator_ted_cruzs_contradictory_position_on_illegal_immigration.html
Cruz had been my favorite until he voted in favor of the Iran give-away treaty. Maybe he can explain the blunder but to date he hasn't and I remain very wary...
Hedge funds are the Republican version of Carbon Credits.
>> Vote for Trump, get a Justice Kennedy in the White House. . . . Vote for Cruz, get a Justice Scalia <<
Great analogy!
(And we don’t even need to mention other outstanding GOP appointments like Justices Roberts, Souter, Sandy O’Connor, John Paul Stevens, Warren Berger, Harry Blackmun and Earl Warren.)
I might feel sorry about these people. But, then again they are the ones trying to force undocumented Democrats into the country and they are giving us Jeb and all of the other country club rinos. Screw them let them ay all of their taxes. they obviously do not care about what we think. So I don’t care about them and their taxes. I can be just as passive and a do nothing Republican when it comes to their concerns as they can be towards our concerns.
I will gladly take four Kennedy’s over, Ginsberg, Sotomayor, Kagin, and Breuer rather than three more clones of Ginsberg over Alito, Thomas, Scalia. As for Roberts well........
Coffee keyboard etc.....
Suppose the hedge fund manager is paid a “performance bonus” equal to 20% of the capital gains. This would be considered taxable income and is subject to normal rates of income tax for “ordinary income.”
In the current system, the identical income to the fund manager is considered to be capital gains and is subject to a much lower tax rate than ordinary income.
The theory behind a lower tax rate for capital gains includes the concept that the stock owner takes the risk of loss and therefore it’s fair to charge a lower tax rate for gains.
However, in the hedge fund case, the fund manager doesn’t own the stock and is not exposed to risk of loss on the underlying asset value.
It’s wrong tax policy to transform a performance bonus into capital gains where there is no risk of loss. Hence, I believe Trump is correct to go after this anomaly.
Cruz is a terrible campaigner. Until he fixes that he has no chance.You haven't been paying attention.
The Cruz worshipers are hoping Trump (most worshipers hate) is doing all the dirty work and heavy lifting so, when the time is just right, he can hand the reins over to the true conservative, Cruz. And if you don't believe he's a "true conservative" just ask him.
On what planet is that a capital gain? The hedge fund managers had no capital invested. Trump is right on this one.
Your use of the word “anomaly” is very gracious.
Cruz organized this Iran rally. Fine, but I doubt it will do any good other than to get the media there - which I think is Cruz’s main purpose. He knows they will show up in droves if Trump is on the bill. So, how does this reconcile with the fact that he voted for this Iran debacle and now he is holding a rally against it? What am I missing here? Is this just a ploy so that he can get more exposure for himself? To my knowledge, the only other candidate he invited is Trump. This sounds calculated and devious to me.
Sad but true. He will be anointed with some magic juice by Trump and ride to victory.
i thot the same thing. they use the system to get a tax free bonus. i say all paychecks should be tax free. it’s not income any way you look at unless you are a corrupt government employee, black robes and all. kick them all out burn the place down.
Maybe he can explain the blunder but to date he hasn't and I remain very wary...As far as I'm concerned that vote alone is enough proof that he's not worthy of being President.
Brilliant conservative constitutional lawyer my ass.
Taxing some one because you don’t like them is an ignorant way to determine policy. This is the biggest problem I have with Trump, the legacy of attitude he foments in his followers.
I think Hillary now has something like a change in the carried-interest tax from capital gains to ordinary income. But she doesn’t call it that so it doesn’t look like she’s copying Trump.
(born, not borne, by the way)
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