Democrats and hedge fund managers : an unholy alliance

Being a left wing liberal, I used to think that democratic party fights for low and middle class interests. Not any more I guess.

Read an article in Washington Post last week, here is the link.

Hedge fund mangers are the new friends for democratic party people. I thought, GOP fights for the interests of rich people and their tax cuts. Since when, democrats started doing this?

For the starters Hedge funds are similar to mutual funds, but intended for High Net Worth individuals and institutional Trusts. Typical hedge funds require a minimum investment of 1 mil and keep the money for a minimum of 1 year. And the mangers would take 20% of your profits.

Sounds fair, but here’s is catch. These hedge fund managers who make approx 1 billion per year, pay 15% tax. 15% wtf !, I pay 30%. The loophole is, the profits made by the Hedge fund is categorized as Capital Gain taxes(usually 15%). But actually this should be categorized as pay for their work (taxed at 30 -35%). So Steven A. Cohen “Hedge Fund King” who made 900 mil last year paid 15% tax . Don’t get me wrong, I admire this guy. Just trying to show the disparity.

Warren buffet is the only billionaire who acknowledges this problem. The third richest man in US of A pays 15% tax and his secretary who makes 60 Grand per annum, pays 30% tax.

Coming back to article, we all know that We can’t take the lobbyists out of DC. No matter what kind of rules you pass they’ll comeback in a different way. We can’t eliminate this fund raising from the politics. But Hedge fund industry is the Democratic darling. Senator Charles Schummer (D-NY) now oppose legislation that would raise taxes on Hedge funds. What??

Just a little math from the article

“By taxing investment management services as ordinary income, not capital gains, the nonpartisan Joint Committee on Taxation estimates that the Treasury could bring in an additional $26 billion over the next decade.

The second measure in the House bill would shut down fund managers' abilities to shift compensation to offshore tax havens and defer tax payments on that money for years. Closing that loophole would reap the Treasury nearly $23 billion through 2017”

And the offshore tax heavens, that’s a whole different story. You just can’t imagine the kind of tax shelters these investment companies offer to their clients. As always, excellent report by PBS. Watch it at your leisure.

Day by day, it’s becoming hard to defend liberals track record in the congress and senate. They recently passed a resolution declaring “Ottoman empire committed genocide in Armenia 1000 years ago” So apparently Armenian lobby is very powerful. What’re these guys smoking. Of all the issues, Ottoman empire atrocities are important now?

Among all the Presidential candidates out there Ron Paul is appealing right now. I don’t agree with all the things he say, but this guy is sincere and know what he is talking about. Hard to believe that this libertarian is from GOP. I’ll write about his campaign in my next post.

Peace.