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Pious Perverts See other Pious Perverts Articles Title: Hedge Fund Power! Hedge Fund Power! It turns out that tax breaks for Wall Street moguls are a civil rights issue. Who knew? Friday, September 7, 2007; Page A20 IF YOU'RE lobbying to keep a tax break, rich white guys making astronomical sums by investing other people's money aren't the most sympathetic clients -- especially when they're paying taxes at a lower rate than firefighters and teachers. So the private-equity and hedge fund industry has come up with a cynical new approach, arguing that raising their taxes would hurt women- and minority-owned firms and dampen investment in needy urban areas. Among those providing funding for the new group, called the Access to Capital Coalition, is the Private Equity Council, a trade association formed by 11 larger funds to stifle some pesky lawmakers thinking about ending their cushy tax deal. "The present carried interest policy has been essential to attracting top talented minorities and women to the industry as independent firms and fund managers. Its elimination, consequently, would have the unfortunate effect of impeding this great progress," Willie E. Woods Jr., a founding member of the new group, says in its press release. The underlying issue involves a debate about how to tax income known as "carried interest," the cut of profits that hedge fund and private equity managers receive from investments. The question is whether this income should be considered as legitimate capital gains income, and therefore eligible for the 15 percent tax rate, or should be more properly viewed as ordinary income, and subject to tax rates as high as 35 percent. The beneficiaries of this sweet break say it rewards risk-taking and that changing the rules would dampen economic growth. But as Congressional Budget Office Director Peter R. Orszag testified yesterday before the House Ways and Means Committee: "Most economists would view at least part, and perhaps all, of the carried interest as performance-based compensation for management services . . . rather than a return on financial capital invested by that partner." If the point of a preferential rate on capital gains is to encourage investors to take risks with their money, that doesn't apply to the fund manager, who's risking other people's money. And somehow we suspect that "top talented" managers would be attracted to making megabucks even if they had to pay their fair share of taxes. Still, it's touching to know that the folks at the Blackstone and Carlyle groups are so concerned with ensuring investment in the inner city.
Poster Comment: The funny part: They're right!
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#1. To: Tauzero (#0)
It's for the children . . . and the poor . . . and women . . . and minorities . . . and the homeless . . . and the sick . . . and did I mention that's it's for the children? Ha!
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