It's a strange populism that denounces Wall Street in one breath and, in the next, shouts down tax changes that would treat the financiers' incomes like those of everyday folks.
But that pro-billionaire version of populism seems to have won big in the midterm elections. And it probably means the demise of a congressional effort to strike down one of the most outrageous provisions of our messed-up tax code, which is the special treatment of "carried-interest" compensation that's paid to many investment fund managers.
This loophole is so unfair that it gets criticized even by some of the tycoons who have benefited from it, such as former Treasury secretary Robert Rubin and other prominent investors I've queried. Basically, it taxes the money paid to managers of private-equity funds and similar partnerships at 15 percent, as if it were risk capital, rather than at ordinary income rates of 35 percent. (I'm assuming that the neopopulist Congress will balk at letting that rate rise to its old, pre-Bush level of 38 percent.)
As is so often the case with policies that benefit big business, the carried-interest break survives by invoking small business. It's argued that if congressional reformers have their way, they will gut compensation for all the little mom-and-pop partnerships that depend on carried interest. (Not to mention the hard-pressed little guys who own oil partnerships.)
A similar illogic leads many people to believe you are attacking Main Street if you suggest withdrawing the Bush-era tax cuts to people making more than $250,000. Perhaps it's part of the American ethos that we all think we're rich. Otherwise, it's hard to explain this popular defense of privilege - and the fact that the politically enfeebled Obama administration has caved to extending the tax cuts.
Democrats tried to stand up to pressure from the billionaires' lobby on the carried-interest loophole. Barack Obama campaigned against the provision in 2008, and he included the repeal in his first two budgets. The House passed a version of the reform on May 28, denying capital-gains rates for what the House report rightly said was "investment management services income."[...]
That political legerdemain is making America more unequal every year, and the polls show people are mad as hell at Wall Street and Washington, both. And yet the popular chorus continues: Save the tax breaks for the rich.
Thursday, November 18, 2010
David Ignatius wonders why Congress is "protecting a tax code that benefits the rich." Without a doubt, it's a very good question. One that I would like to hear a good answer coming from Republicans. Sadly, they never offer a good answer just some crap about having an adult conversation. By protecting the rich, you ignore the country's real needs. Here's some excerpts: