Common Sense on Hedge Funds

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Noam Scheiber points to some genuinely good news in today’s New York Times piece about Barack Obama’s upcoming budget outline.  From the Times:

The president will propose to tax the investment income of hedge fund and private equity partners at ordinary income tax rates, which are now as high as 35 percent and could return to 39.6 percent under his plans, instead of at the capital gains rate, which is 15 percent at most.

Senior Democrats in Congress joined with Republicans in 2007 to oppose that increase. But with Wall Street discredited and lucrative executive compensation a political target, the provision could prove more popular among lawmakers.

This refers to the “carried interest” loophole, which allows hedge fund management fees to be counted as capital gains on the theory that — well, there was never really much of a theory for it at all.  If you invest your own money and make a return, that’s a capital gain.  But if you get a piece of the return for managing someone else’s investment, that’s a management fee.  It’s ordinary income, and there’s really no plausible theory under which it should be counted as capital gains.

Except, of course, under the theory that hedge fund managers would prefer to pay low capital gains taxes on their income, and since hedge fund managers contribute lots of money to political campaigns they usually get whatever they want.  It really was just about that crude, and Democrats displayed colossal cowardice when they refused to eliminate this loophole two years ago.  It’s good to see that Obama is going to try to embarrass them into finally doing the right thing and making rich people pay the same rate on their income as everyone else.

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Truth #1: The chaos is the point.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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