Let Them Eat Cake

Gee, times are indeed tough for the ultra-rich.  Forced, forced to choose between things like a $14,500 sabayon in Sri Lanka or a $25,000 chocolate sundae.

Fortunately, they've still got the protection of both the Bush Administration and the Senate, noteably Senator Chuck Shumer:

But key Democratic senators, among them New York’s Charles Schumer, who is the main fund-raiser for Senate Democrats, are balking. They know they must provide alternative tax relief, but they don’t want to tax private equity and hedge funds to pay for it.
(Source: NY Times Editorial Alternative Tax Showdown)

Valiant protector of tax breaks for the ultra-rich, defender of pro-torture Bush Leaguers... which party does he belong to again?

A science fiction author named Mack Reynolds wrote some humorous novels about a future US where one person, one vote was replaced by one dollar, one vote.  Prophetic

•  Alms for the Poor?

  ;)

  by RepubAnon on Thu Nov 08, 2007 at 07:30:49 PM PDT

•  Eh...

  ...two things: first of all, hedge funds, private equity, and other forms of capital gains income are things which are designed in part to avoid corporate taxes.  Should these specific sorts of partnerships be targeted with specific taxes, these funds will simply take on new forms.  Which Schumer knows.

  Second, these are partnerships which do the bulk of their US business in New York, which I'm sure is obvious to him.  They are also some of the only groups making money in the current market.

  That Schumer is standing for his own constituents should be expected.  If this is really a good idea (which I doubt), then it is something which will be great for every other state but New York.  Which means that even were it to pass with near universal approval, New York Senators would be likely to oppose it.  That isn't corruption - that's representing your state.

  by Jay Elias on Thu Nov 08, 2007 at 07:34:58 PM PDT

  •  so there are more people in NY that can afford

    a $25,000 edible gold sundae then there are labor and minimum wage workers. That's not representing his state. That's representing his wallet. Also, after eating a $25,000 edible gold sundae, do you wipe or save? Having never eaten edible gold (does the stuff in Goldschlager count?)I'm concerned about the logistics.

    by psilocynic on Thu Nov 08, 2007 at 07:48:57 PM PDT

    •  Well...

      ...the article itself says that most of the inquiries about the gold sundae are coming from Europeans.  So, as ridiculous as it is, I'm fairly happy to have high ticket items in New York for rich tourists from other countries.  And the article has nothing to do with hedge funds or private equity in any case.

      But he represents his constituents.  Many of whom would be worse off if this tax change took place.  So, while I'm sure it is selfish for Schumer too, this is actually not a popular idea in his state.

      by Jay Elias on Thu Nov 08, 2007 at 07:54:07 PM PDT

  •  Two things:

    very IIRC, but I believe it would be very unwieldy to cram the substance of hedge fund arrangements into forms that would preserve preferential tax rates.  It's just too tough to get the tax tail to wag the corporate form dog.

    Decent point re: Schumer representing his constituency, but in this case, the current set-up is egregious enough that I don't think anyone gets a pass for self-interest.  Put differently, it's not terribly surprising he'd stick up for uber-rich hedges, but disappointing nonetheless.

    by burrow owl on Thu Nov 08, 2007 at 08:02:35 PM PDT

    •  I don't know if it is a pass...

      ...but clearly, most of this money is generated in New York, and most of the increased tax revenue will not go to New York.

      Considering the current rate of transfer, I don't blame any New Yorker who wants New York to shoulder more of the US tax burden.

      by Jay Elias on Thu Nov 08, 2007 at 08:17:17 PM PDT

  •  It's the Hedge Fund Managers Income

    They work all day running the hedge funds, but claim their income is "long term capital gains."  Closing this loophole would net the Treasury a significant chunk of change:

    For Private Investment, the Party Isn’t Over
    New York Times
    October 10, 2007
    ...
    Some of the competitive advantages of these firms, including a favorable tax structure, were also under intense scrutiny in Congress — and even from within its ranks.

    “A tax loophole the size of a Mack truck is right now generating unwarranted and unfair windfalls to a privileged group of money managers,” Leo J. Hindery Jr., a private equity executive, said last month. “To no one’s surprise, these individuals are driving right through this $12-billion-a-year hole.”
    ...
    Private equity firms are structured as partnerships, and pay tax rates of only 15 percent on the bulk of their compensation. Some hedge fund managers are deferring billions of dollars offshore, where the money is compounding tax- free.

    So why do these managers pay income taxes at a 15% rate while their secretaries pay income taxes at almost twice that percentage?

    by RepubAnon on Thu Nov 08, 2007 at 09:02:36 PM PDT

    •  Technically...

      ...because their income is actually invested in the fund.

      Most hedge funds today copy the LTCM model, which had the managers taking their income as portions of the fund itself, rather than by liquidating any assets from the fund to pay them in cash.  Which, as LTCM proved, has major risks, as its managers were the participants of the fund who lost nearly everything while generally its investors made a profit.

      by Jay Elias on Thu Nov 08, 2007 at 09:05:50 PM PDT