Hey, Congress, How About A Little Bang For Our Bucks?
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
I know there must be more revenue generated to make things better.
To that end, the fiscal cliff guys decided not to extend the 2-percent reduction in Social Security withholding.
Anybody who gets a paycheck knows that.
They also raised rates on people who make more than $450K a year.
OK. Fine. I get it.
The government needs more revenue.
But for what?
I truly don’t mind paying my fair share. I understand the government needs funds to operate.
But when it goes so far beyond that, it starts to bother me. I guess what I’m saying is that I don’t mind my taxes going up, but show me some bang for the buck.
If you shell out more money for something – generally – you get a superior product.
A Cadillac, generally, is nicer than a Chevy, for example .
But with our government, we seem to pay more, while simultaneously getting inferior products.
We pay higher taxes, but the infrastructure is crumbling. We pay higher taxes, but our kids do worse when compared to other developed nations. We pay higher taxes so the government can stimulate the economy, yet the economy isn’t stimulated.
See, I don’t think the problem is too little money flowing to the federal government. I think the money government collects is poorly spent.
Let me give you just one tiny $22 billion example.
Now, remember, if you really dug into this you could probably come up with a trillion dollars worth of fiscal silliness.
But for the purposes of this column we’ll focus on this paltry $22 billion gem.
Seems when the fiscal cliff guys were deciding on how much revenue they needed to siphon out of the private sector, they also decided to help out a few of their friends.
Enter the “carried interest” tax loophole.
Republicans and Democrats alike decry such things, attacking them as benefits enjoyed only by rich people.
But given the opportunity to do the “right thing” during the fiscal cliff negotiations, our fearless lawmaker leaders did precisely the opposite.
They extended the carried interest provision.
That means hedge fund managers and executives of investment firms get to have profits from the sale of a company taxed at the capital gains rate instead of the traditional earned income tax rate.
The difference?
Cap gains – soon to be 20 percent. Earned – soon to be 39.6 percent.
The cost of this to taxpayers, $22 billion over the 10 years covered by the fiscal cliff agreement.
Now, I understand taxing capital gains at a lower rate. For example, I earn money from the Times-Union. I pay income tax on those earnings. I invest some of what’s left. It generates income. When I collect that income it is taxed again – but at the lower capital gains rate.
Here’s another example. I earn money that is taxed. I use some of it as a downpayment. I get a loan and buy a house. I make payments using money taxed at the earned income rate. At some point, I sell the house for more than I paid for it. The profit is taxed at the capital gains rate.
That makes sense to me.
But that’s far different than a hedge fund manager selling a company.
Those guys argue their carried interest exemption is fair because they get deferred profits from making risky investments.
But the risk is not being shouldered by these hedge fund mangers. The risk is being shouldered by their clients – the people who put up the money.
Hedge fund managers are being paid to manage a hedge fund. It’s a job. It should be taxed as earned income.
Heck, stockbrokers, financial planners and bankers – all of whom invest other peoples’ money for a fee – pay taxes at the earned income rate. Why not hedge fund managers?
I’ll tell you why.
It’s because they paid somebody to lobby Congress to get their happy little carried interest provision passed. This doesn’t create jobs. This doesn’t stimulate the economy. This isn’t about some greater good for all of humanity.
It’s about jamming more money into the pockets of hedge fund managers – even as the clerk at the grocery store has to give $30 or $40 a month more to pay his or here “fair share.”
Remember, this is one tiny, $22 billion example.
How can we ever expect to get government spending under control when these guys can’t even see their way to end giveaways for hedge fund managers?[[In-content Ad]]
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I know there must be more revenue generated to make things better.
To that end, the fiscal cliff guys decided not to extend the 2-percent reduction in Social Security withholding.
Anybody who gets a paycheck knows that.
They also raised rates on people who make more than $450K a year.
OK. Fine. I get it.
The government needs more revenue.
But for what?
I truly don’t mind paying my fair share. I understand the government needs funds to operate.
But when it goes so far beyond that, it starts to bother me. I guess what I’m saying is that I don’t mind my taxes going up, but show me some bang for the buck.
If you shell out more money for something – generally – you get a superior product.
A Cadillac, generally, is nicer than a Chevy, for example .
But with our government, we seem to pay more, while simultaneously getting inferior products.
We pay higher taxes, but the infrastructure is crumbling. We pay higher taxes, but our kids do worse when compared to other developed nations. We pay higher taxes so the government can stimulate the economy, yet the economy isn’t stimulated.
See, I don’t think the problem is too little money flowing to the federal government. I think the money government collects is poorly spent.
Let me give you just one tiny $22 billion example.
Now, remember, if you really dug into this you could probably come up with a trillion dollars worth of fiscal silliness.
But for the purposes of this column we’ll focus on this paltry $22 billion gem.
Seems when the fiscal cliff guys were deciding on how much revenue they needed to siphon out of the private sector, they also decided to help out a few of their friends.
Enter the “carried interest” tax loophole.
Republicans and Democrats alike decry such things, attacking them as benefits enjoyed only by rich people.
But given the opportunity to do the “right thing” during the fiscal cliff negotiations, our fearless lawmaker leaders did precisely the opposite.
They extended the carried interest provision.
That means hedge fund managers and executives of investment firms get to have profits from the sale of a company taxed at the capital gains rate instead of the traditional earned income tax rate.
The difference?
Cap gains – soon to be 20 percent. Earned – soon to be 39.6 percent.
The cost of this to taxpayers, $22 billion over the 10 years covered by the fiscal cliff agreement.
Now, I understand taxing capital gains at a lower rate. For example, I earn money from the Times-Union. I pay income tax on those earnings. I invest some of what’s left. It generates income. When I collect that income it is taxed again – but at the lower capital gains rate.
Here’s another example. I earn money that is taxed. I use some of it as a downpayment. I get a loan and buy a house. I make payments using money taxed at the earned income rate. At some point, I sell the house for more than I paid for it. The profit is taxed at the capital gains rate.
That makes sense to me.
But that’s far different than a hedge fund manager selling a company.
Those guys argue their carried interest exemption is fair because they get deferred profits from making risky investments.
But the risk is not being shouldered by these hedge fund mangers. The risk is being shouldered by their clients – the people who put up the money.
Hedge fund managers are being paid to manage a hedge fund. It’s a job. It should be taxed as earned income.
Heck, stockbrokers, financial planners and bankers – all of whom invest other peoples’ money for a fee – pay taxes at the earned income rate. Why not hedge fund managers?
I’ll tell you why.
It’s because they paid somebody to lobby Congress to get their happy little carried interest provision passed. This doesn’t create jobs. This doesn’t stimulate the economy. This isn’t about some greater good for all of humanity.
It’s about jamming more money into the pockets of hedge fund managers – even as the clerk at the grocery store has to give $30 or $40 a month more to pay his or here “fair share.”
Remember, this is one tiny, $22 billion example.
How can we ever expect to get government spending under control when these guys can’t even see their way to end giveaways for hedge fund managers?[[In-content Ad]]
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