I didn't see a diary specifically on this subject yesterday and think it's too important to leave unnoticed. We're not just about electing Democrats on this site, we're also about calling out our Democrats when they fail to act like Democrats.
In his NY Times column yesterday -- http://select.nytimes.com/... -- Paul Krugman praises the Democrats in the House for passing the SCHIP legislation, and standing up to special interests in the Health Insurance Industry to do so: the money for the program was offset by reducing a subsidy to that extremely profitable sector.
Krugman contrasts that with Chuck Schumer (D, Wall St NY) working against legislation to make Hedge Fund Managers, who currently benefit from an insane tax loophole, pay the same taxes as the rest of us. Explanation after the jump.
From the column:
The hedge fund tax loophole is a crystal-clear example of unjustified privilege. Because of a quirk in the law, the people who run these funds don’t pay taxes like ordinary mortals.
For example, the salaries that pension fund employees receive for managing other peoples’ money are taxed as ordinary income, at rates up to 35 percent. But if that money is invested with a hedge fund — and 40 percent of the money in hedge funds comes from public, corporate and union pension plans — the fees the hedge fund manager receives for his services are mainly taxed as capital gains, with a maximum rate of 15 percent.
The arguments usually made on behalf of this unique privilege make no sense. We’re told that the tax rate on hedge fund managers has to be kept low to encourage risk-taking. But the managers aren’t risking their own money. The only risk they face is the uncertainty of their fees — and as any waitress who depends on tips or salesman who depends on commissions can tell you, most people with uncertain incomes don’t get any special tax breaks.
We’re also told that management fees would rise, reducing returns to investors, if the privileged status of fund managers is eliminated — as if someone with a $100-million-a-year hedge fund job would walk away if his take-home pay fell from $85 million to $65 million.
Krugman rightly makes fun of Schumer's excuse for fighting the legislation to close this egregious loophole:
Mr. Schumer says that he opposes any increase in hedge fund taxes unless tax breaks for the energy and real estate industries are also eliminated, and pigs start flying. Seriously, his claim that he really would support closing the hedge fund loophole if other, deeply entrenched tax privileges were eliminated at the same time is a fig leaf that hides nothing.
Mr. Schumer, who heads the Democratic Senatorial Campaign Committee, insists that the large financial contributions that hedge funds make to his party aren’t influencing him. Well, I can’t read his mind, but from the outside his position looks remarkably like money-driven politics as usual. And that’s not acceptable.
Krugman ends his column with a warning that if Democrats protect THEIR special interests (e.g., Hedge Fund Managers) the way Republicans treat theirs (e.g., Halliburton) they risk looking no better and losing the electoral advantage they gained by pointing to the Republican culture of corruption. That is a warning Democrats like Schumer ignore at the Party's peril (even if his own seat may be "safe").
For those who don't have Times Select, here's a link to a free version of Krugman's column: http://economistsview.typepad.com/...