I remember reading the stunning information that carried interest is not part of any laws: it is a ruling by some executive body (IRS? Treasury? Someone else?)
How is it possible that an agency may maintain a rule that is demonstrably tragically wrong and unfair? Isn't there an internal review process?
Isn't there someone in the administration who can demand a change, either by executive order or by pressure or by replacing an obtuse leadership?
How is it possible that an agency may maintain a rule that is demonstrably tragically wrong and unfair? Isn't there an internal review process?
Isn't there someone in the administration who can demand a change, either by executive order or by pressure or by replacing an obtuse leadership?
23
I appreciate the patriotism! I would also like to see the bureaucracies that receive the tax monies become interested in becoming more efficient, customer focused and accountable so the average citizen doesn't perceive those dollars disappearing into a mismanaged black hole with little return on investment. Patriotism always includes serving the greater good. It can take many forms.
12
With all respect to Patricof, let's bear in mind that he's over 80 years old and in the twilight of his (long, distinguished) career. He's made his low-tax pile. It'd count more if a younger generation of VC or hedge fund manager were to say the same thing.
22
An amazing Wall Street Patriot....
7
It's refreshing to see some folks at least offering a symbolic gesture toward paying their fair share of taxes. I would like to see a national discussion about tax policy in relation to capital vs labor. The notion of putting ones capital at risk warrants preferential treatment presumes that such investments benefit society more.
In addition, let's also talk fair tax on not just the wealthiest citizens but corporations that shield their tax liabilities in friendly countries that avoid paying taxes.
Ultimately, if the very well off ( including corporations) paid their fair share, we could significantly address the problems that plague our society. Tax policy should promote the greater good, period.
In my view, we would be a stronger healthier society if we leveled the field with all of us paying our fair share of taxes as a patriotic thing to do.
My two cents and i claim no deduction.
In addition, let's also talk fair tax on not just the wealthiest citizens but corporations that shield their tax liabilities in friendly countries that avoid paying taxes.
Ultimately, if the very well off ( including corporations) paid their fair share, we could significantly address the problems that plague our society. Tax policy should promote the greater good, period.
In my view, we would be a stronger healthier society if we leveled the field with all of us paying our fair share of taxes as a patriotic thing to do.
My two cents and i claim no deduction.
11
It's rare and noteworthy when anyone advocates a policy shift that is against their own self-interest. We could use a lot more of that, on a host of issues. Hope it catches on.
However, apart from this issue, why should capital gains be taxed lower than ordinary income at all? Last year I returned to hard manual labor, after many years in an office, and to do so had to inventory and manage each day through whichever joint was acting up. I remembered manual labor is the most difficult type of work.
Why do we need to provide extra incentives for investment beyond what the investment itself yields, and without the aches?
However, apart from this issue, why should capital gains be taxed lower than ordinary income at all? Last year I returned to hard manual labor, after many years in an office, and to do so had to inventory and manage each day through whichever joint was acting up. I remembered manual labor is the most difficult type of work.
Why do we need to provide extra incentives for investment beyond what the investment itself yields, and without the aches?
25
Mr. Patricof has consistently supported policies that benefit society as opposed to individual beneficiaries of tax loopholes and other discrepancies in our system. I hope his colleagues will pay attention to this well presented opinion and do their part in contributing to the doctrine of economic fairness.
20
Removing the carried interest (how can it be called "interest" anyway?) loophole is a good first step. Let's then move on to fixing the tax treatment of real estate.
18
"The capital gains tax benefit was originally created for people who invested with their own capital at risk. It was established as an incentive for investors to take greater risk than they would with their ordinary income."
So we want create an incentive for investors to take greater risks. Why? Does risky speculation provide some benefit beyond increasing the fortunes of already-wealthy individuals? Perhaps we should look at eliminating taxes on winnings at the crap table or bets on professional sports. That may sound lie a spurious argument, but consider--how is a casino bet qualitatively different than a "bet" on the future value of a bundle of mortgages or pork bellies?
We're all entitled to our opinions (they say), but I've never heard a sound justification for allowing the fruits of speculation to be taxed at a lower rate than money earned by working 40 hours a week (or more), 50 weeks a year, In fact, I have a hard time understanding why it isn't taxed at a higher rate. The ROI on speculation rarely is recycled back into the "real economy" in the form of consumption, while wages are spent, usually to the very last dollar. That spending drives our economy, while accumulation of wealth doesn't.
So we want create an incentive for investors to take greater risks. Why? Does risky speculation provide some benefit beyond increasing the fortunes of already-wealthy individuals? Perhaps we should look at eliminating taxes on winnings at the crap table or bets on professional sports. That may sound lie a spurious argument, but consider--how is a casino bet qualitatively different than a "bet" on the future value of a bundle of mortgages or pork bellies?
We're all entitled to our opinions (they say), but I've never heard a sound justification for allowing the fruits of speculation to be taxed at a lower rate than money earned by working 40 hours a week (or more), 50 weeks a year, In fact, I have a hard time understanding why it isn't taxed at a higher rate. The ROI on speculation rarely is recycled back into the "real economy" in the form of consumption, while wages are spent, usually to the very last dollar. That spending drives our economy, while accumulation of wealth doesn't.
33
I can't decide if this is a genuine call to action or pandering to the angry electorate. If it's genuine then do something real, get a bunch of your venture capitalist friends to sign a letter to Congress and The Treasury demanding a fix to the carried interest loophole, this year. Anything less and I'll know you're pandering to the electorate via main stream media.
29
Thank you Mr. Patricof. The market, any market, is simply an amoral process- literally neither good nor bad. It is how we deal with its impacts is the moral question and there is no defensible reason for the carried interest benefit except to serve as an example of what is for sale by congress.
17
Thank you for this article. I an pleased to see something about carried interest coming from one who benefits from it that does not try to justify their use of it. Some never realize that this is a tax break that flies into the face or most people.
Thank you for the honesty and asking it be changed even though you benefit from it.
Thank you for the honesty and asking it be changed even though you benefit from it.
8
You should pay the top rate on carried interest? No, you shouldn't even earn carried interest at all, because your "job" shouldn't exist. Non managed index funds routinely meet or exceed the performance of a "managed" fund, so what do you do, exactly? Apparently a goldfish or a metronome could do your job, so why are you paid at all?
21
One important first step would be to differentiate between types of "investment." Investing in the stock market, for example, is not enterred into the tabulation of GDP because it does not represent activity in the "real" economy and contributes nothing to economic growth. Direct investment in a business, on the other hand, is a factor in the GDP calculation, hence it is a factor in economic growth.
This suggests a very simple test for qualifying for a capital gains exemption: if your "investment" is included in the GDP tabulation, you should qualify for the deduction. Otherwise, you shouldn't.
This suggests a very simple test for qualifying for a capital gains exemption: if your "investment" is included in the GDP tabulation, you should qualify for the deduction. Otherwise, you shouldn't.
8
Close my tax loophole. How about close my tax loopholeS. As other comments have indicated income is income, and treating capital gains income differently than wage income is more of a loophole than an incentive. Mr. Ellison of Oracle receive $38 million in pay one year: $0 or $1 in salary and the rest in stock options in which he had nothing at risk and would eventually pay capital gains. And he didn't even have to pay any payroll/social security taxes. Closing the carried interest loophole while good is but a small plug in the massively porous dike of loopholes.
Even Jeb Bush, in announcing his candidacy, pointed out that there were THOUSANDS of loopholes that needed to be addressed, particularly those that only benefit a tiny minority of already very wealthy folks. But , Sanders supporters, don't hold your breath-under the last Clinton to be President capital gains tax rates were REDUCED down to 20%.And President Obama's proposal to means test the deduction for charitable contributions was not supported by either Clinton. Yes, if enacted, they would get a smaller deduction on the $1 million they gave to their personal foundation. Would they stop giving?
Even Jeb Bush, in announcing his candidacy, pointed out that there were THOUSANDS of loopholes that needed to be addressed, particularly those that only benefit a tiny minority of already very wealthy folks. But , Sanders supporters, don't hold your breath-under the last Clinton to be President capital gains tax rates were REDUCED down to 20%.And President Obama's proposal to means test the deduction for charitable contributions was not supported by either Clinton. Yes, if enacted, they would get a smaller deduction on the $1 million they gave to their personal foundation. Would they stop giving?
13
Congress DID vote to eliminate the carried interest tax exemption in 2010
"The plan (was) approved by the House, which overcame strong lobbying pressure from Wall Street, "
The bill died in the Senate (D controlled) as did three previous attempts.
http://www.nytimes.com/2010/05/29/business/29carried.html
"The plan (was) approved by the House, which overcame strong lobbying pressure from Wall Street, "
The bill died in the Senate (D controlled) as did three previous attempts.
http://www.nytimes.com/2010/05/29/business/29carried.html
21
"Please help stop me from not paying taxes" - what a joke!
7
"tax fairness" think that all progressives need to strive for "tax fairness" -- Working people that might support the 'no tax GOP' could be shown what this way of taxing might do for them and how the trickle down 'no tax' ways of the past many years is not fair or good for the country....
4
How about the other loopholes in tax code that benefit the wealthy more so than the average Joe and their income is not largest enough to participate.
Step-up in basis in inheritance tax which only 1% of population is affected and its one of the 10 largest federal tax expenditures
401K loophole, same thing most of don't participate in large way
home mortgage interest on two multi million $$$$$ when average Joe just has $$ on one property.
Many others that have to be cleaned up while being honest and helping in paying for all the projects, infrastructure, research & development, people that have been ignored for the past 30 years.
Step-up in basis in inheritance tax which only 1% of population is affected and its one of the 10 largest federal tax expenditures
401K loophole, same thing most of don't participate in large way
home mortgage interest on two multi million $$$$$ when average Joe just has $$ on one property.
Many others that have to be cleaned up while being honest and helping in paying for all the projects, infrastructure, research & development, people that have been ignored for the past 30 years.
9
I wonder what a person who, let's say for simplicity, nets after tax $1B does with all of her money? Even after 6 homes and a car elevator, Mitt Romney had money to spare. And I am happy for him, not bitter, not envious.
Studies have shown that most of the excess money is not used to create jobs. Demand creates jobs. Even the US government creates millions of jobs with its demands for planes, tanks, etc. Sorry to those of you who believe that the government does not create jobs. But I digress.
The person who nets $1B cannot spend it all, especially if the year before the person netted another $1B. So if the tax rate became 20% higher, the net earnings after tax would be $800,000,000.
So what is the argument against a rational change in the tax policy regarding carried interest? That paupers would abound? That the little people should be taxed more? Or is it just greed?
Studies have shown that most of the excess money is not used to create jobs. Demand creates jobs. Even the US government creates millions of jobs with its demands for planes, tanks, etc. Sorry to those of you who believe that the government does not create jobs. But I digress.
The person who nets $1B cannot spend it all, especially if the year before the person netted another $1B. So if the tax rate became 20% higher, the net earnings after tax would be $800,000,000.
So what is the argument against a rational change in the tax policy regarding carried interest? That paupers would abound? That the little people should be taxed more? Or is it just greed?
13
The number Alan Patricof sites, that carried interest vs. ordinary income costs the U.S. $2 billion a year, seems absurdly, and perhaps ludicrously low. Two billion? A mere 2000 million? Really? Please.
"According to the Congressional Joint Committee on Taxation, carried interest costs the American people nearly $2 billion in tax receipts every year."
"According to the Congressional Joint Committee on Taxation, carried interest costs the American people nearly $2 billion in tax receipts every year."
6
Did seem low.
At a 15% to 20% capital gain tax rate, that would mean only $10 - $13 Billion is being sheltered as "carried interest."
At a 15% to 20% capital gain tax rate, that would mean only $10 - $13 Billion is being sheltered as "carried interest."
3
It's long overdue for 'carried interest' to be eliminated. The only ones to have access to the capital gains rate should be individuals who have their own money at risk. The carried interest encouragement has served its purpose decades ago.
6
Bravo! (Sort of.) Mr. Patricof is entirely correct in his argument for the equitable tax treatment of carried interest. But he avoids the even greater high-end freebie that goes with lower taxation of capital gains. America's entire taxation system devalues labor, according it inferior dignity to the act of, say, buying a stock.
It's fine to make money. I'm all for it and wish I had been better at it than I have been. The manner of making it, however, should be treated equally. Labor is just as important to a nation's welfare as the accumulation of assets through the purchase and sale of paper instruments.
The debacle of 2008-2009 resulted partly from the relative devaluation of human labor.
www.endthemadnessnow.org
It's fine to make money. I'm all for it and wish I had been better at it than I have been. The manner of making it, however, should be treated equally. Labor is just as important to a nation's welfare as the accumulation of assets through the purchase and sale of paper instruments.
The debacle of 2008-2009 resulted partly from the relative devaluation of human labor.
www.endthemadnessnow.org
6
I read the replies of Jason and Alex and worry that they do not learn from history: what is past, is past. We cannot tax retroactively with any degree of fairness, and we cannot call for revolution without knowing that both sides suffer. We are fortunate to live in a representative democracy, which allows us to actually work for and vote to elect individuals to serve all of us in Congress, if we are willing to work to get our majority to elect those individuals. For four years in the early 1980s I had the opportunity to work directly with the US Senate and House of Representatives. I came away from that experience believing that they all must have a taste of masochism! Some had great motivation "to do good" for all Americans. I cannot say that all had the same motivation.
I am here writing comments in the NY Times rather than slogging through to gain the majority votes of my Commonwealth, or of my Congressional district. I think of the rich man who asked Jesus what he needed to do in order "to be saved". When he was told what he must do, he "walked away sad".
We must all strive to voice our opinions and give our recommended solutions to as many people as we can, and seek the election of individuals who best reflect our views, and who are willing to work with all other elected colleagues to pass legislation for the good of all Americans.
I am here writing comments in the NY Times rather than slogging through to gain the majority votes of my Commonwealth, or of my Congressional district. I think of the rich man who asked Jesus what he needed to do in order "to be saved". When he was told what he must do, he "walked away sad".
We must all strive to voice our opinions and give our recommended solutions to as many people as we can, and seek the election of individuals who best reflect our views, and who are willing to work with all other elected colleagues to pass legislation for the good of all Americans.
1
As usual, this debate has lost all nuance. Mr. Patricof is an extremely wealthy late stage investor these days who essentially functions like an investment bank, not a true VC. I agree 100% that late stage VC managers should not qualify for the carried interest exception. Early stage investors -- those who raise money to invest in companies that are just getting started are different, however. The amount of work involved is huge. The non-financial support they provide to companies is paramount to their long-term success in many cases. And the management fees they receive tend to be quite modest. They are playing for a possible future, not a guaranteed present. Their work and the risks they take have made the tech boom possible. Seed and Series A VCs, who invest at the earliest stages should be treated as if they are investing their own money because most of them have give up far more lucrative jobs in finance and are often paying forward the success they themselves had a entrepreneurs. So don't lump them in in with the VCs who are really just bankers. Treat them as capital investors to encourage more early stage funds, and cut or eliminate the carried interest exception for later stage VC fund operators, who are generally pure financial managers with little skin in the game.
2
A simple tax code - treat all incomes the same - would go a long way to get a "fair taxation."
9
Dream on. The basic reason the tax code is so complex is because people are great at finding loopholes. Even the definition of income is very complicated because of all the ways people try to avoid it. If your employer gives you a car is that income? What if the car is used only for business? What if it is used partially for business? If your employer gives you a doughnut is that income? What if he gives you a thousand doughnuts that you're free to resell? People try anything they can to avoid taxes and the tax code responds.
3
Better late than never. I am glad that that he finally saw the light. I will go even further suggesting that capital gains should be taxed exactly the same any other income as a first step for reducing the income inequality gap.
5
I would like for a NYTimes reporter to find out how many tax returns each year take advantage of the carried interest provision. Certainly, it can't be more than a few thousand. The real story here is how a tax provision involving so few people could be passed in a nation of 350 million people. Looked at from that perspective, it is simply ludicrous.
13
A few wealthy will admit what all the wealthy know - they get more breaks then those making less. Way more. They know it like they know where they'll be vacationing every few weeks. But admitting it means outright admission and fully "funds" all the people and groups saying it for...well for centuries now.
This is the fact of being wealthy - you get more breaks. There are people and organizations whose only job is to see that they get more of them. Be they the lobbyists, or accounting and/or financial firms seeking out loop-holes in the tax codes, or hidey-holes in offshore accounts.
I dont begrudge those who make so much money -if they actually earned it for doing something (not the Kardashians, etc) I do get angry when nothing, and I do mean nothing is done for those making under 100K a year, especially those under 60K. We've been left out in the cold with very hungry packs of predators surrounding us. Namely credit card companies and their usury rates and fees. Banks offering less then half-penny interest rates, charging fees for every minutiae of a transaction, etc. (I think my bank hits me with a bad speaker use-fee at the drive-up window, and I have to pay-up for a clear transmission.)
Making me angrier is that neither candidate is paying the disparity of "breaks" any attention. Oh Trump offered us a lame version of Trickle down, but nothing else. But neither are local politicians doing much either, which is where the most pain is inflicted. Local taxes. School esp
This is the fact of being wealthy - you get more breaks. There are people and organizations whose only job is to see that they get more of them. Be they the lobbyists, or accounting and/or financial firms seeking out loop-holes in the tax codes, or hidey-holes in offshore accounts.
I dont begrudge those who make so much money -if they actually earned it for doing something (not the Kardashians, etc) I do get angry when nothing, and I do mean nothing is done for those making under 100K a year, especially those under 60K. We've been left out in the cold with very hungry packs of predators surrounding us. Namely credit card companies and their usury rates and fees. Banks offering less then half-penny interest rates, charging fees for every minutiae of a transaction, etc. (I think my bank hits me with a bad speaker use-fee at the drive-up window, and I have to pay-up for a clear transmission.)
Making me angrier is that neither candidate is paying the disparity of "breaks" any attention. Oh Trump offered us a lame version of Trickle down, but nothing else. But neither are local politicians doing much either, which is where the most pain is inflicted. Local taxes. School esp
11
The simple fact is the complexity of the tax code leads to an endless fountain of loop holes. Carried Interest may become obsolete replaced with "Carried XXX" for another 42 years.
We need a simple tax policy built upon a single rate, single deduction, single treatment of ALL sources of personal income.
We need TAXparency. Where no citizen can question whether another citizens is getting unfair treatment by the tax code.
We need a simple tax policy built upon a single rate, single deduction, single treatment of ALL sources of personal income.
We need TAXparency. Where no citizen can question whether another citizens is getting unfair treatment by the tax code.
9
Mr. Patricof is of course to be applauded for the stance he has taken regarding his support for a change in the tax laws that would have a direct and seriously negative effect on his own tax payments. Those who, from the left, criticize him for speaking "only now" after benefiting from this absurd loophole for 46 years should know that Alan, whom I have known slightly over many years, has worked very hard for a very long time to help the Democratic Party and such leading figures as President Clinton, in full knowledge that those politicians, once elected, would champion just such a change in the tax laws. This is in sharp contrast to those on the right, whose political donations almost invariably support government actions that would benefit their business interests, even if cloaked in high-minded rhetoric about "freedom" and "the marketplace." These people love to characterize the "liberal" donor class as just another special interest. They cannot imagine that they truly are working for the PUBLIC interest, even to their own personal, financial detriment.
11
Question for anyone. Is it then possible that the folks who have pledged to give all their money away (Giving Pledge) having long recognized the absurdity of our tax situation and lack of real risk taking on the part of investors, decided to assuage their guilty by funding the non-profit world, to then only receive more tax benefits for donating?
1
Since traders are making megabucks on electronic trading designed to take advantage of minor price changes and beat the hoi polloi to the punch, perhaps a minor transaction tax on individual trades might be in order.
21
The (Republican majority) Congress voted in 2010to close the carried interest tax hole
"House votes to eliminate tax hedge fund tax break"
http://www.nytimes.com/2010/05/29/business/29carried.html
Only to see the bill killed in the Democratic majority Senate, largely due to the efforts of Senator Charles E. Schumer (D) New York, whose campaign contribution overwhelmingly come from the finance industry. If you study the details, it was one of the most brilliant maneuvers in his career.
Mr. Schumer is now the leader designate of the Democrats in Senate, after the retirement of Mr. Ried.
The chances that the tax will be eliminated under Ms Clinton, in spite of her pre-election rhetoric is zero.
Not only does she need to cooperate with Mr. Schumer, defender of Wall Street, her ties to and enrichment from the finance industry are too deep for this to become reality.
"House votes to eliminate tax hedge fund tax break"
http://www.nytimes.com/2010/05/29/business/29carried.html
Only to see the bill killed in the Democratic majority Senate, largely due to the efforts of Senator Charles E. Schumer (D) New York, whose campaign contribution overwhelmingly come from the finance industry. If you study the details, it was one of the most brilliant maneuvers in his career.
Mr. Schumer is now the leader designate of the Democrats in Senate, after the retirement of Mr. Ried.
The chances that the tax will be eliminated under Ms Clinton, in spite of her pre-election rhetoric is zero.
Not only does she need to cooperate with Mr. Schumer, defender of Wall Street, her ties to and enrichment from the finance industry are too deep for this to become reality.
12
Okay. Sounds great as a first step, Mr. Patricof. The next step will be to tax back the wealthiest - the top 1% - at about 95% on all wealth at federal and state levels for about 10 years to recover some of the wealth lost by average and poor Americans over the past 40+ years. We could then rebuild our neglected infrastructure, provide meaningful primary education in every community and restore social services that have been devastated in the last 40+ years.
9
So you've personally exploited this "loophole" for 46 years? One would think you're about ready for retirement. You gonna pay back taxes on those 46 years' worth of carried interest, or is it time to close this loophole because you won't be affected?
7
What difference does it make?
2
The lower tax rate on carried interest has not been in effect for 46 years.
2
Well there - here is the good news Alan J. Patricof - there is not a single person in America stopping you from paying the higher rate on carried interest.
Unless - of course - you are simply pontificating - I eagerly await the release of your 2016 tax return.
Unless - of course - you are simply pontificating - I eagerly await the release of your 2016 tax return.
6
Snippy, but only partly correct. And if he made larger payments, the government would be forced to refund them. If he made them as donations, they would be eligible for charitable deduction.
The spirit of the article is make the tax system fairer. Don't rig it so that only the super wealthy can benefit at the expense of the rest of us. It is no crime to take advantage of your options in taxes or life. But there should be more opportunity to all. And in that way all would benefit under capitalism, not just the lucky few.
The spirit of the article is make the tax system fairer. Don't rig it so that only the super wealthy can benefit at the expense of the rest of us. It is no crime to take advantage of your options in taxes or life. But there should be more opportunity to all. And in that way all would benefit under capitalism, not just the lucky few.
8
So does any discussion of tax policy constitute "pontificating"? It seems you don't like the message so attack the messenger.
5
Good luck with that one!
Alan, since you pay less tax than you should, do you correspondingly give more to charities or just talk about changes to the tax codes?
3
all the more reason why HRC should release the transcripts of her lavishly paid speeches to Goldman, etc.
4
I agree but it's a little late in the game for you to be doing what is right, don't you think? Maybe the tax should be made retro active.
1
Thank you for understanding how tax law can threaten the fabric of our society. I hope other hedge fund managers join your call.
8
I admire your honesty, thank you Mr. Patricof.
10
Thanks you Alan for your refreshing honesty and fairness. May we all follow you example in all areas of our lives.
7
The closer you are to the source of money, the more you get to keep.
1
To Alain J. Patricof - In case you are not aware of the fact that you can volunteer to pay more Federal Income Tax, you can. The IRS will let you. So step up and just pay the tax as if it exited and literally put you money were you mouth is.
4
This is an article about tax policy, not about one individual's tax payments.
5
David - if enough of the VCs got together and just started paying their fair share it would create the atmosphere to change things
People of good will can create change.
Right now op-ed pieces like this look like good publicity. They should put their money where their mouth is
People of good will can create change.
Right now op-ed pieces like this look like good publicity. They should put their money where their mouth is
2
Common sense solution, tax the rich, tax the corporations, tax all Republican'ts and those who vote for and assist them out of existence. No more tax evasion or loopholes or inversions. See corporations Amazon dot com and Bezos (just began "offering" forcing naive employees no more than 30hrs per week so they could avoid paying higher salaries and other benefits necessary for the employees to survive), Mylan and Epipens, all of Wall Street, ExxonMobile, Morgan Stanley and Jamie Diamond, Facebook, Walmart, etc. Jail them all and put out of business now.
Remember the Panama Papers! More government not less. More regulations not fewer. More socialism not less. More unions not fewer. It works just fine in Europe, Canada, Japan. And stop running around calling the populists communists. Look in the mirror because you and your ilk are no different from Joe McCarthy and his ilk from the 1950s or the fascist Republican'ts of the last 40 years. No more so called Free Market or liaise faire.
Tell all you know to vote ONLY Democrat 2016.
Just another reason to vote ONLY Democrat 2016 and shove the Republican'ts and their ilk so far down that they will never recover.
Remember the Panama Papers! More government not less. More regulations not fewer. More socialism not less. More unions not fewer. It works just fine in Europe, Canada, Japan. And stop running around calling the populists communists. Look in the mirror because you and your ilk are no different from Joe McCarthy and his ilk from the 1950s or the fascist Republican'ts of the last 40 years. No more so called Free Market or liaise faire.
Tell all you know to vote ONLY Democrat 2016.
Just another reason to vote ONLY Democrat 2016 and shove the Republican'ts and their ilk so far down that they will never recover.
4
You don't want Democrats in the WH and Congress. You want Lenin.
1
Not sure you will get much support from your colleagues, but agree that carried interest should be treated as ordinary income.
4
I notice every few years someone comes up with a, I should be paying my taxes letter. Why? If you know you should be paying, how hard is it to just write the check and get on with the rest of your day. This letter is not noble, it's a farce. This is a letter from the, I love America crowd, I just don't want to pay for it. The amount of people who this letter will hook will be large most likely, but I'm not buying what your selling.
1
just do it.
3
Mr. Patricof's colleagues are certainly betting on the loophole staying wide open these next eight years:
http://www.wsj.com/articles/hedge-fund-money-48-5-million-for-hillary-cl...
http://www.wsj.com/articles/hedge-fund-money-48-5-million-for-hillary-cl...
3
I approve this message.
3
WHy dont we get that guy Grover Norquist to send around a petition to all the hedge fund managers to ahve them sign the 'carried interest' tax refund proposal!
7
I agree with Mr Patricof and I'm glad to see someone from the Marie Antoinette Wall Street set have a moment of understanding about the threat the current wealth and tax imbalance poses to our democracy. But I also love reading the few letters here defending the current loophole, as it gives us and opportunity to see their distorted justifications and thinking. Of course, they don't need a persuasive argument for Congress. Just enough contributions.
6
Thank you Mr. Patricof for your clear-minded viewpoint.
I would like only to make the additional point that, as we try to make the tax code fairer, we must also try to close off some of the avenues that the tax accountants of the very rich use to shelter money from all taxes (tax havens for example). I don't know how widespread this practice is but it should be illegal. All people should be willing to pay in to support the country in which they live and from which they benefit, to the best of their ability. As you said, "demonstrate a little more patriotism".
One more small point: we really need to close some of the real estate tax loopholes that Donald Trump has been using to avoid paying taxes for years.
I would like only to make the additional point that, as we try to make the tax code fairer, we must also try to close off some of the avenues that the tax accountants of the very rich use to shelter money from all taxes (tax havens for example). I don't know how widespread this practice is but it should be illegal. All people should be willing to pay in to support the country in which they live and from which they benefit, to the best of their ability. As you said, "demonstrate a little more patriotism".
One more small point: we really need to close some of the real estate tax loopholes that Donald Trump has been using to avoid paying taxes for years.
6
"Mrs. Clinton has vowed that if Congress does not close the loophole, as president she would ask the Treasury Department to use its regulatory authority to do so."
If this is possible, why hasn't the Obama administration done it?
If this is possible, why hasn't the Obama administration done it?
4
And that is one way to define tax fairness. It is also a way to define patriotism; the ability to ignore one's own inconvenience for the good of the Nation.
When Reagan was elected I had the argument with my father, a democrat whose bishops wouldn't let him vote for any democrats, that we would see the exploitation of greed become common place in our culture.
If he were still alive I would say; I told you so.
The Reagan revolution ended up substituting greed for patriotism and in T rump we see the results.
When Reagan was elected I had the argument with my father, a democrat whose bishops wouldn't let him vote for any democrats, that we would see the exploitation of greed become common place in our culture.
If he were still alive I would say; I told you so.
The Reagan revolution ended up substituting greed for patriotism and in T rump we see the results.
5
Tax fictitious capital only works if your goal is to create obstacles to free movement of capital, thus "channeling" it to somewhere else (generally, to the real economy).
The reason for this is simple: fictitious capital doesn't represent real wealth. If a government suddenly expropriate all financial assets at once, it will not be able to convert those trillion dollars in real things (e.g. banks total debt is ten times the world GDP, which is absurd in concrete terms). This "wealth" only exists in constant circulation, eternal movment. It's virtual.
The useful thing of fictitious capital is command over labor force: financial capital uses this monetary wealth to control the rest of the world, including sovereign States (e.g. Greece on its knees), and ordinary people as well.
So, taxing financial (fictitious) capital will not solve the problem, since the profit rates in the real economy are already low.
The only definite solution for this is the abolition of capitalism and the birth of socialism. Financial capital should be entirely expropriated (not only the funds, but also the banking and financial infrastructure, the banking system) and put under direct democratic control (control of the people). Then industrial capital should be next in line (including and specially agribusiness and the industrial-military complex). The workers should gain control of the output they already produce, extinguish the bourgeoisie, and become the producers class (socialism).
The reason for this is simple: fictitious capital doesn't represent real wealth. If a government suddenly expropriate all financial assets at once, it will not be able to convert those trillion dollars in real things (e.g. banks total debt is ten times the world GDP, which is absurd in concrete terms). This "wealth" only exists in constant circulation, eternal movment. It's virtual.
The useful thing of fictitious capital is command over labor force: financial capital uses this monetary wealth to control the rest of the world, including sovereign States (e.g. Greece on its knees), and ordinary people as well.
So, taxing financial (fictitious) capital will not solve the problem, since the profit rates in the real economy are already low.
The only definite solution for this is the abolition of capitalism and the birth of socialism. Financial capital should be entirely expropriated (not only the funds, but also the banking and financial infrastructure, the banking system) and put under direct democratic control (control of the people). Then industrial capital should be next in line (including and specially agribusiness and the industrial-military complex). The workers should gain control of the output they already produce, extinguish the bourgeoisie, and become the producers class (socialism).
1
Good luck with this noble sentiment, Mr. Patricof. But if you think you will be joined by even a few of those who share your income source, all I can say is: Ain't gonna happen. No way, no how. Not as long as Congress is controlled by the GOP, and most definitely not if the occupant of the White House is Republican.
You might as well appeal to all who benefit from carried interest to do the right thing and donate what they don't pay as a fair share of their income to the US general fund. That'd bring in a lot of money, wouldn't it?
In our graduated system of taxation, all income should be treated equally. Period. So, you gambled your own money on a venture position and hit it big. What, really, is the difference between that and putting your entire wad on Red and the roulette wheel? Winnings carried home from Vegas don't get preferred tax rates. You don't get to deduct your losses beyond your winnings, either, and you can't drag them behind you from year to year to take advantage of when the ball bounces your way.
I appreciate your honesty and your feelings on this matter, but I don't expect many of your compatriots to put their money where your mouth is.
You might as well appeal to all who benefit from carried interest to do the right thing and donate what they don't pay as a fair share of their income to the US general fund. That'd bring in a lot of money, wouldn't it?
In our graduated system of taxation, all income should be treated equally. Period. So, you gambled your own money on a venture position and hit it big. What, really, is the difference between that and putting your entire wad on Red and the roulette wheel? Winnings carried home from Vegas don't get preferred tax rates. You don't get to deduct your losses beyond your winnings, either, and you can't drag them behind you from year to year to take advantage of when the ball bounces your way.
I appreciate your honesty and your feelings on this matter, but I don't expect many of your compatriots to put their money where your mouth is.
5
"Marred by the toxic belief that the country's economic order is rigged".
Let's see,
a. 1/2 of our lawmakers are millionaires
b. I assume YOU are a "millionaire" yet cannot see that this isn't a 'toxic belief' but a stark reality because
c. What about all the other benefits of which corporations and folks like yourself take advantage such as parking profits overseas hence paying zero taxes on the money?
I somewhat applaud your lonely voice in the wilderness of "Inequality" but you seem to think that this inequality is some form of "viewpoint" instead of "reality" evidenced when you crash back to earth saying closing the interest loophole would "carry great symbolic weight".
'Symbolic" gestures may ease your conscience but, I'm afraid, symbolism will not solve the poverty situation nor the health care situation in this country.
I do give you an "A" for effort but, really, isn't your "pocketbook" your primary concern here?
Let's see,
a. 1/2 of our lawmakers are millionaires
b. I assume YOU are a "millionaire" yet cannot see that this isn't a 'toxic belief' but a stark reality because
c. What about all the other benefits of which corporations and folks like yourself take advantage such as parking profits overseas hence paying zero taxes on the money?
I somewhat applaud your lonely voice in the wilderness of "Inequality" but you seem to think that this inequality is some form of "viewpoint" instead of "reality" evidenced when you crash back to earth saying closing the interest loophole would "carry great symbolic weight".
'Symbolic" gestures may ease your conscience but, I'm afraid, symbolism will not solve the poverty situation nor the health care situation in this country.
I do give you an "A" for effort but, really, isn't your "pocketbook" your primary concern here?
1
If everyone believes that this law should be changed why has it not been done. After all congress passed the ACA which many did not support. Reason must be corruption.
5
I find this a disingenuous attempt at looking charitable and appearing to want to do the right thing, when absolutely no change in the law is actually required to do so.
Application of the tax code generates the minimum tax required. The last time I checked, the Federal government will accept checks of any amount ABOVE the amount due and happily apply that to the federal deficit. It's like paying extra principal on your home mortgage.
So if Partricof (and Gates and Buffett and all the rest) really wants to pay more tax, it's fairly simple: write a check today and mail it. Make it for a billion. The Feds will cash it, your conscience will be clear and our deficit will be a tiny bit lower.
If you aren't willing to do that, then keep your opinions to yourself because you're just trying to look great and generous when actually you're just looking for underserved credit.
Application of the tax code generates the minimum tax required. The last time I checked, the Federal government will accept checks of any amount ABOVE the amount due and happily apply that to the federal deficit. It's like paying extra principal on your home mortgage.
So if Partricof (and Gates and Buffett and all the rest) really wants to pay more tax, it's fairly simple: write a check today and mail it. Make it for a billion. The Feds will cash it, your conscience will be clear and our deficit will be a tiny bit lower.
If you aren't willing to do that, then keep your opinions to yourself because you're just trying to look great and generous when actually you're just looking for underserved credit.
3
I agree with you wholeheartedly. Now let us see how many members you can garnish to your conscience club. I'll tell you. NONE. Besides, if you had called for this change in 1970 when you founded first fund, then it would be more convincing. But after taking and enjoying the wealth made possible with this very loophole, your call seems totally hollow, too hypocritical. The good thing is that all major Presidential Candidate have been very critical about this loophole. The presumed President, Hillary Clinton has vowed to close it, vehemently. But I hope this is not just election rhetoric.
1
Pay as much additional tax as you desire. No need to wait for a new law. Since 1843 the federal government has accepted donations:
Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782
Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway, Room 622D
Hyattsville, MD 20782
4
Tax breaks for "job creators" is a continuing, ever evolving scam perpetrated on the American people by our bought and paid for well heeled clowns in the Congress.
9
With all the talk of late about carried interest being unfair and unpatriotic, which it is, what about that yawning hole of a tax loophole in front of our collective face—the Clinton Foundation family "charity," which makes Clinton ill-gotten gains tax-free by simply transferring cash from one Clinton pocket into another?
The Clintons rob the taxpayer to give kickbacks to their donors who give billions to their fake charity—an illicit holding cell for both their flunkies during the interregnum & illegal foreign funds for their run—that exploits catastrophes by giving their family/cronies lucrative contracts that cheat the poor & devastated.
The Clinton Foundation is an illicit money-laundering operation, a de facto illegal foreign super PAC, a never-ending foreign-cash-cow slush fund that is auctioning off our economy, security, sovereignty and liberty to the highest foreign bidder as it allows the Clintons—purportedly mere millionaires—to live like billionaires and have the marginal tax rate of paupers.
This latest scam makes their 90s WH quid pro quo look like—if you’ll pardon the oxymoron—penny ante treason.
As Giuliani warned, the Foundation is a RICO conspiracy.
A RICO conviction & confiscation of all their assets gained through a pattern of racketeering activity—which is all of it. Please.
It’s about time the Clintons “spread the wealth around”—and paid for their crimes—don’t you think?
The Clintons rob the taxpayer to give kickbacks to their donors who give billions to their fake charity—an illicit holding cell for both their flunkies during the interregnum & illegal foreign funds for their run—that exploits catastrophes by giving their family/cronies lucrative contracts that cheat the poor & devastated.
The Clinton Foundation is an illicit money-laundering operation, a de facto illegal foreign super PAC, a never-ending foreign-cash-cow slush fund that is auctioning off our economy, security, sovereignty and liberty to the highest foreign bidder as it allows the Clintons—purportedly mere millionaires—to live like billionaires and have the marginal tax rate of paupers.
This latest scam makes their 90s WH quid pro quo look like—if you’ll pardon the oxymoron—penny ante treason.
As Giuliani warned, the Foundation is a RICO conspiracy.
A RICO conviction & confiscation of all their assets gained through a pattern of racketeering activity—which is all of it. Please.
It’s about time the Clintons “spread the wealth around”—and paid for their crimes—don’t you think?
4
The Clinton foundation is s public charity organization that distributes about 6 percent to outside and 89 percent is spent on in house initiatives, like working in Africa with farmers, women's education, etc. To say it a front for money laundering or other such nonsense is pure partisan whining.
6
Then why not pay the tax voluntarily until this obviously unfair and discriminatory tax policy is corrected? The failure to make the correction voluntarily suggests that the problem behind the failures of capitalism is not an institutional one, it is a fundamental moral problem with the axiom. "Greed is good." I would submit that greed is not good and there are ways to correct it even before the law is changed.
1
"Tax fairness"? What an interesting concept! The Lobbyists will never allow the House (or Senate) to pass any such legislation.
3
The fact this loophole continues to exist is the most powerful evidence there is of the complete breakdown of Congress. There is no good argument for it, leaders in both parties have condemned it and the money involved isn't enough for it to be relevant to the "we must starve the beast" types. Yet this thing lives on year after year after year.
To a degree I'm glad it lives on. Such a gaping sore makes the hidden sickness underneath more obvious.
To a degree I'm glad it lives on. Such a gaping sore makes the hidden sickness underneath more obvious.
4
I note this problem and a lot of others could be solved if the tax on corporations were eliminated and if everything anyone got from corporations, either dividends, capital gains or salary and wages were taxed at ordinary rates.
That is in effect how small corporations are taxed and how partnerships are taxed and trusts and just about everything else you can imagine. Such a change would make the tax code a lot simpler and would give the appearance at least that everybody was paying their fair share of taxes, rather than giving the appearance of taxing and actually taxing some at a lower rate.
That is in effect how small corporations are taxed and how partnerships are taxed and trusts and just about everything else you can imagine. Such a change would make the tax code a lot simpler and would give the appearance at least that everybody was paying their fair share of taxes, rather than giving the appearance of taxing and actually taxing some at a lower rate.
"In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of." - Confucius
3
Unfortunately, (future) President Clinton is going to have a fight on her hands. Some of carried interest's staunchest, if not vociferous, backers are Democrats with ties to the financial services industry. By all accounts NY's Chuck Schumer, from his seat on the Senate Finance & Banking committees has been sandbagging this change for decades as requiring more "study". We shall see what we shall see.
6
Any income that doesn't pay it forward in the form of a job, a durable good with intrinsic value to society or a service that lifts everyone needs to be taxed to the hilt.
2
How much in taxes did this author save since 1970? what is the accrued compound earnings on this savings?
I will give more credence to this call for patriotism and fairness as soon as Mr. P. discloses the above sums -- if he does not give it to the Treasury how about some worthy charities?
I will give more credence to this call for patriotism and fairness as soon as Mr. P. discloses the above sums -- if he does not give it to the Treasury how about some worthy charities?
3
"There needs to be a more realistic attitude from those of us who have benefited from the carried interest loophole for too many years. We need to demonstrate a little more patriotism, and a greater sense of fairness, even if it affects our pocketbooks." -- Alan J. Patricoff
G. I. Luvmony doesn't like reality any more than the rest of us do.
It's conducive to profit making when everyone else does it, but ignoring reality yourself is not the best way to recognize and take advantage of new opportunities in a world that's driven by change.
G. I. Luvmony doesn't like reality any more than the rest of us do.
It's conducive to profit making when everyone else does it, but ignoring reality yourself is not the best way to recognize and take advantage of new opportunities in a world that's driven by change.
"$2 billion in tax receipts" not paid here, another $2 billion not paid there, over that past over 46 years this amount skimmed off the backs of the American public is not chump change.
Imagine if we could treat all our income as our own "Carried Interest" for tax purposes? Unfortunately it is an "exclusive" club benefit given by our so called elected representatives.
"Carried Interest" has to be fully taxed income. If the fund managers want to reinvest their after-tax earnings into their fund and get the tax benefit on what is invested, that would go a long way towards fairness.
Imagine if we could treat all our income as our own "Carried Interest" for tax purposes? Unfortunately it is an "exclusive" club benefit given by our so called elected representatives.
"Carried Interest" has to be fully taxed income. If the fund managers want to reinvest their after-tax earnings into their fund and get the tax benefit on what is invested, that would go a long way towards fairness.
5
"We need to demonstrate a little more patriotism..." Refreshingly, a wealthy person put into words the fundamental harm their wealth does to the country when used for political gain. What Mr. Patricof measures in writing about this piece of the tax code, one of countless many he could have mentioned that the wealthy have purchased at bargain prices from Congress, is the damage done to the U.S. When deciding how many years to sentence a traitor, doesn't a judge ask him or herself the same question? When judging a person's patriotism, don't we ask how much that person has given - including sometimes their lives - to the country, and not how much they've taken? While no one questions the patriotism of the Greatest Generation, Mr. Patricof rightfully questions the patriotism of their Boomer children, who were on the receiving end when young and never stopped taking. And never stopped to think what their lifelong overarching greed was doing to the country. Mr. Patricof, Mr. Buffet and a few others are the exceptions that prove the rule.
2
Among the innumerable fictions peddled for decades by the GOTP is that we have "excessively high" tax rates on corporations (which, after all, "are people too, my friend"), or that the wealthy pay "far more" than those who struggle. The truth is that corporations, in the main, pay almost zero in taxes, evading and shirking their responsibility towards the nation; just as egregiously, these outrageous tax dodges for fund managers baked into our tax codes by the GOTP, and some Democrats as well, in order to grease the skids for their plutocrat angels, have allowed far too many wealthy individuals to skate by while the rest of us shoulder an increasing burden. I say amen to Alan Patricof, who is honest enough to acknowledge that he and his fellow Wall Street fat cats, have failed the ultimate test of patriotism: to give back and help to sustain our entire nation. Our infrastructure is crumbling around us and is shamefully, dangerously obsolete, and we need the tax revenue to repair the damage. Every single one of us owes a huge debt to this nation, and it is long past time for the wealthiest to pay their fair share.
11
I'm not sure how carried interest ever got to be considered as capital gains. My understanding is that it dates back to a tax court decision in the 1960's relating to real estate investments. Regardless, it seems for income to be considered as a capital gain there needs to be the risk of a capital loss. Carried interest has only an upside and no downside so it shouldn't be classified as a capital gain.
An even better solution would be to eliminate corporate income taxes entirely and tax that income at the individual shareholder level. That gets rid of lots of gamesmanship and also eliminates the "double taxation" argument for favorable tax treatment of dividends and capital gains.
Will this ever happen? Not as long Wall Street pays politicians hundreds of thousands of dollars to give speeches.
An even better solution would be to eliminate corporate income taxes entirely and tax that income at the individual shareholder level. That gets rid of lots of gamesmanship and also eliminates the "double taxation" argument for favorable tax treatment of dividends and capital gains.
Will this ever happen? Not as long Wall Street pays politicians hundreds of thousands of dollars to give speeches.
2
Not as long as Citizens United allows money to buy pet legislators.
4
I wholeheartedly agree with the author that the Federal government should close the "carried interest" loophole. It seems to me that much loathing of the government derives from the perception that the rich get special treatment, in both access and taxation, with carried interest being the most glaring tax example. Honestly, the country needs a fairer taxation and a reversal of the Supreme Court's disastrous Citizens United decision, and ideally, publicly funded election campaigns. It cannot be good for the country's long term survival as a liberal democracy for gross inequality and resentment to fester for so long.
4
Let me explain something which isn't apparent from Mr. Patricof's op-ed. Carried interest is a way of re-allocating a partnership from the limited partners to the general partner, in respect of profit carve-out, typically 20% of net profit. At the end of the day the same pool of securities is owned, but (in most cases) cash is not exchanged.
VC firms, even more so than hedge funds, wouldn't want immediate taxation of the profit of illiquid investments and, indeed, may not be able to sell restricted securities to pay the IRS when April 15th rolls around.
The solution would be for the individual or other entity to carry a subordinated type of liability for the taxes owed at the marginal tax rate for ordinary income on each security which has been re-allocated to the general partner. If the security drops in value, the liability is reduced (without tax penalty for debt forgiveness.)
I can see the accounting and law firms, accounting software writers drooling at the complexity of all this and the number of billable hours.
VC firms, even more so than hedge funds, wouldn't want immediate taxation of the profit of illiquid investments and, indeed, may not be able to sell restricted securities to pay the IRS when April 15th rolls around.
The solution would be for the individual or other entity to carry a subordinated type of liability for the taxes owed at the marginal tax rate for ordinary income on each security which has been re-allocated to the general partner. If the security drops in value, the liability is reduced (without tax penalty for debt forgiveness.)
I can see the accounting and law firms, accounting software writers drooling at the complexity of all this and the number of billable hours.
3
Many commenters are of the opinion that all capital gains should be taxed at ordinary income rates, and part of their rationale is much investment is just moving money about in the capital markets unproductively.
I'm in favor of differentiating between productive and unproductive investing. Speculating in derivatives is basically gambling. It's not productive. Tax it like ordinary income. However, investing in the stock of a new company which helps it create jobs is productive. Certainly there are many variations between these 2 extremes. I would think that tax code writers could be directed by Congress to come up with the rules for what constitutes productive vs. unproductive investments, and enact those into a revised IRS code along with the carried interest change.
I'm in favor of differentiating between productive and unproductive investing. Speculating in derivatives is basically gambling. It's not productive. Tax it like ordinary income. However, investing in the stock of a new company which helps it create jobs is productive. Certainly there are many variations between these 2 extremes. I would think that tax code writers could be directed by Congress to come up with the rules for what constitutes productive vs. unproductive investments, and enact those into a revised IRS code along with the carried interest change.
4
Excellent, but what a hope!
In our looting economy, take the money and run seems to be regarded as a right rather than a scam. Real value is for suckers.
Unfortunately, humanity's humankind is full of crashes because people who figured out how to build themselves up at the expense of their societies got greedy and crashed and burned it not only for their victims but for themselves.
But one can, and must, hope. Thanks to Mr. Patricof!
In our looting economy, take the money and run seems to be regarded as a right rather than a scam. Real value is for suckers.
Unfortunately, humanity's humankind is full of crashes because people who figured out how to build themselves up at the expense of their societies got greedy and crashed and burned it not only for their victims but for themselves.
But one can, and must, hope. Thanks to Mr. Patricof!
3
I wish we would switch to a system of taxation of assets. Every asset - corporation and individual alike - has an owner and a value. If you have more assets and you're such a wiz at making money, your return on your investment/assets would far outweigh a, say, 1 or 2% taxation on assets. There wouldn't be so much of a shell game.
1
Sure, let's switch the tax burden to older and mostly retired people. For most of us, wealth (assets) acrue over a long working career. And of course, represent savings from income that has already been taxed.
2
depreciating assets as well?
1
We should get rid of the capital gains tax break for all investments - just tax all income as income. People do not invest the capital because there is a tax break. They invest their money to generate income. Let's just tax income.
6
God bless you! (And God bless those who may object to my beliefs.)
You can, of course, make a just donation to the IRS.
Maybe we need to start collecting the names of True Patriots - willing to pay Fair & Just Taxes. It's a shame we've lost the virtue that paying taxes is a Civic Responsibility.
Maybe we need to remind Congress they work for the public good. Not the greedy.
You can, of course, make a just donation to the IRS.
Maybe we need to start collecting the names of True Patriots - willing to pay Fair & Just Taxes. It's a shame we've lost the virtue that paying taxes is a Civic Responsibility.
Maybe we need to remind Congress they work for the public good. Not the greedy.
5
Good article, but if the author opened a fund 46 years ago, he is presumably nearing retirement and so his stake in the carried interest loophole is reduced. This would be more impressive if it came from a mid-career fund manager.
2
Good idea. Let's take a serious look at some of the real estate tax breaks too, including depreciation and all the REIT gimmickery, and estate taxes too. Congress should remember that tax breaks are a zero sum game; granting them to one group ultimately means the other groups have to pay more to cover the shortfall.
11
The irony in here is, Mr. Patricof can also write a check to Department of the Treasury for his "unpaid taxes" in addition to writing this op-ed article. I don't think Department of the Treasury will refuse his generous check.
5
No sensible person, rich or poor, would or should pay more taxes than the government requires. The government is the tax collector, so it is the government's obligation to set policies and rates that are fair for all. Expecting anyone to voluntarily pay additional taxes is ridiculous and would be a foolish way to run a country.
1
Sure, Mr. Patricof can volunteer. For the rest of the greedy swine, the tax laws must be changed.
2
It seems like the rich, who have most of the money in the country, want ALL the money. Is it a genetic flaw in Homo sapiens, or cultural? It's like a disease. As an individual gains more wealth, it has to be more and more. Are they afraid that their tens of millions won't be enough? For what? It's vexing for the 90%.
At least Patricof thinks it's enough.
At least Patricof thinks it's enough.
7
All income 'earned' or 'unearned' should be taxed at the same rate. Anything else amounts to criminal taking and redistribution of middle class wealth.
6
If a belief is true it is not toxic. What is toxic is the rigging. I would like to know more. Why, for example, has this not been dealt with by the Obama administration? Who are the people in Congress responsible?
3
You can look to the Republican Congress, who from day 1 chose to obstruct Obama. He had a supermajority for about 5 months between the seating of Al Franken and the sickness and death of Ted Kennedy in 2009. The situation got worse as every reasonable Republican was primaried out of office, feeding the Ted Cruz wing that enforced the costly government shutdown.
You can also look to Democrats who stayed home in droves during midterms (2010, 2014, and also during the Clinton adminstration in the 1990s). We, you see, require perfection, and blame victims - Democrats - for what perps - Republicans do. We punish our own which results in punishing all of us except the superwealthy and powerful who fund your Republican representatives at every level, states as well.
You can also look to Democrats who stayed home in droves during midterms (2010, 2014, and also during the Clinton adminstration in the 1990s). We, you see, require perfection, and blame victims - Democrats - for what perps - Republicans do. We punish our own which results in punishing all of us except the superwealthy and powerful who fund your Republican representatives at every level, states as well.
2
If the writer doesn't think he pays enough taxes he should just cut the Federal Government a check.
5
Conversely, why don't you just volunteer to stop paying your taxes altogether? I won't visit you in prison. Calling for tax fairness does not require a snide response such as this.
3
I think it is a valid point to ask why not either send the Treasury (or a charity) the extra funds one thinks are due if that is really your position.
Your analogy to doing something illegal like underpaying is not a well thought out comparison
I think the op-ed writer and others like him are not acting in good conscience simply by writing about the unfairness of their tax advantage.
Your analogy to doing something illegal like underpaying is not a well thought out comparison
I think the op-ed writer and others like him are not acting in good conscience simply by writing about the unfairness of their tax advantage.
1
I believe a large portion of the funds that are invested in these funds comes from pension plans. What that means is that the gains of the people taking the risk, participants in the retirement plan, will be paying INCOME taxes on the money recieved while the manager, who has no capital at risk, pays capital gains rates.
I believe all income should be taxed at the same rate.
I believe all income should be taxed at the same rate.
10
The problem is not the details of what gets taxed. The problem is that investment is founded on FREE limited liability being given to owners at the expense of tax payers. If limited liability protection was something owners had to pay for like all other insurance, the cost of investing in risky corporations would go up (correctly, because the market would be finding the real price vs the cost being externalized), and the cost of less risky businesses would be relatively lower.
The fundamentals of your business and our economy are based on the very rich externalizing their costs but keeping all the profits. To a certain extent, there's nothing we can do about that--very rich people will always find loopholes. But we can and should make limited liability something that owners pay for directly. In a free market, you should PAY for what you GET.
The fundamentals of your business and our economy are based on the very rich externalizing their costs but keeping all the profits. To a certain extent, there's nothing we can do about that--very rich people will always find loopholes. But we can and should make limited liability something that owners pay for directly. In a free market, you should PAY for what you GET.
3
The law of unintended consequences has not been repealed.
In economic theory, when you raise taxes on something you disincentive it and get less of it. That has been the logic behind taxing cigarettes and why essentially all economists argue for a carbon tax to decrease carbon emissions. If we raise the tax on venture capitalists, one would anticipate seeing less venture capitalists. How much less is unknown. And yet without venture capitalists we wouldn’t have the tech and biotech revolutions that are creating wealth, jobs, and a source of taxes that enables the progressive agenda (see California as an example)
It would feel good – maybe even great! – to increase the tax on carried interest. But before we do so, we should at least pause and ask what effect that would likely have on the economy as a whole.
In economic theory, when you raise taxes on something you disincentive it and get less of it. That has been the logic behind taxing cigarettes and why essentially all economists argue for a carbon tax to decrease carbon emissions. If we raise the tax on venture capitalists, one would anticipate seeing less venture capitalists. How much less is unknown. And yet without venture capitalists we wouldn’t have the tech and biotech revolutions that are creating wealth, jobs, and a source of taxes that enables the progressive agenda (see California as an example)
It would feel good – maybe even great! – to increase the tax on carried interest. But before we do so, we should at least pause and ask what effect that would likely have on the economy as a whole.
2
This isn't intended to those who put their money at risk--ie, the venture capitalists themselves--the writer was talking about those who manage the investors accounts. By his own admission, it is not their money, but their clients. The clients whose money they've invested would continue to earn the legal tax break. Those like himself, whose earnings are based on their investors gains, would not.
Furthermore, it's hard to perceive a significant downside as you suggest. If it eliminates some of the bad players whose questionable investing can put the entire economy at risk (like the 2008 recession), how can that be a bad thing?
Furthermore, it's hard to perceive a significant downside as you suggest. If it eliminates some of the bad players whose questionable investing can put the entire economy at risk (like the 2008 recession), how can that be a bad thing?
2
Income is income and it should all be taxed according to the current rate structure.
Pretending that some income is special and deserving of lighter taxation feeds not only the plutocracy but also the national rage.
Pretending that some income is special and deserving of lighter taxation feeds not only the plutocracy but also the national rage.
8
Well said. Carried interest originated in the 16th century when ship captains in LPs kept 20% of the profits in compensation for the risk of sea travel. They literally had 'skin in the game'. Not so with 21st-century financiers, whose only 'risk' is how much income they receive at the end of the day, just like the rest of us who may lose a job for multiple reasons.
Carried interest ought to be subject to ordinary income rates, but as ordinary income, it also should be subject to Social Security and Medicare taxation. And if the caps on those rates were abolished, we might finally lay to rest all further phony discussion of cutting those programs to save their solvency.
Carried interest ought to be subject to ordinary income rates, but as ordinary income, it also should be subject to Social Security and Medicare taxation. And if the caps on those rates were abolished, we might finally lay to rest all further phony discussion of cutting those programs to save their solvency.
10
A good idea, but I would go further. Treat all income exactly the same, even that of investors who put up their own money. I'm not really buying the argument that we need to give them a tax break to encourage them to take risk. What else would they do with their money? Stuff it in a mattress? Put it in a savings account earning 2%? And their track record on investments lately has not been very compelling. They all rush to buy stock in whatever company has the most spartan business model for its employees. Pay them less and hire fewer of them. Hire them overseas. Or, my personal favorite, declare them "independent contractors," which makes them completely disposable, since it requires no investment in them whatsoever.
And while we're at it, let's apply Social Security and Medicare taxes to investment income, and eliminate the cap on how much income is subject to the tax. Taxing all income as wages may raise enough revenue to allow an actual reduction in the rates, reducing the urge to use shady accounting practices to hide income.
And while we're at it, let's apply Social Security and Medicare taxes to investment income, and eliminate the cap on how much income is subject to the tax. Taxing all income as wages may raise enough revenue to allow an actual reduction in the rates, reducing the urge to use shady accounting practices to hide income.
14
Two billion in lost tax revenue may not seem like much in the twisted megabucks scheme of things, but there are plenty of grossly undernourished children with poorly nourished developing brains who might benefit from some relief. This is the real capital — human capital — and a society that repeatedly claims it wants the best and brightest citizenry is fantastically hypocritical in allowing such tax breaks to folks whose children already have far more than they need. As usual, "put your money where your mouth is" is the applicable standard.
9
The treatment of income arising from a profits interest in a partnership as capital gain is supported by the IRC and the courts. Whether one agrees or disagrees, the resulting benefit is arguably sound tax policy. Corporate employees can obtain the same benefit on a portion of their compensation through the granting and exercise of Qualified Stock Options. However, in that case, the income is counted for purposes of the alternative minimum tax. Treating the carried interest as a tax preference item for AMT may offer a good solution to the question of fairness, while leaving tax policy intact. It should also be noted that if the carried interest is taxed as ordinary income, the partnership should be entitled to a deduction for the payment. There is no deduction for payments of a profits interest. The net effect on tax receipts from changing the treatment of carried interest must also take into account the tax treatment of the payor.
How much more disingenuous can one person be. Mr. Patricof is not really worried about tax fairness or the future of our nation. Clearly, he is only worried about the well deserved economic class war that might be coming after collecting on this insulting tax loophole for 46 years. After the economic debacle of the last financial meltdown, one largely attributable to venture capitalists and private equity investors, a large angry mob of American's seemingly have become "marred by a toxic belief that the country's economic order is rigged against ordinary Americans". Belief indeed. What's the matter Mr. Patricof, can you see the torches?
3
I find it abhorrent that those who are in a position to profit from invested funds are taxed at a lower rate than those who profit from their own physical labor. Yes, it is time for the author and those in his profession to "face reality" and to recognize that they are no better than the rest of us. I'd also like to say to the author that I'm not terribly moved by his concession now that he's at the end of his career and has reaped these tainted benefits since 1970. If he wanted to do something truly weighty and symbolic, he'd give the government all the back taxes the rest of us would have been paying along the way.
2
Enough with the puerile and supercilious challenges to Mr Patricof to pay the taxes he advocates: the issue is one of fairness and he alone paying would be even more unfair than none of them paying.
6
Nonsense -- he, like the sanctimonious Buffett, should pay up.
I have a better idea Mr. Patricof. Not only close the loophole, but let's recapture all that underpayment of tax over the years. That might make a more meaningful impact, albeit a one-time event. We could use those funds to rebuild our country's infrastructure - that would be even more patriotic.
3
A nice try to fess up and appear patriotic and civic minded. What prevented this writer from exhorting his buddies from doing this ages ago? Is it a sign of recognition and fear that the ordinary people are enraged by the way the top 1% have been perpetuating the unfair tax system?
I think it is too little too late.
I think it is too little too late.
3
Amen to the closing of tax loopholes that steal from the poor and give to the rich.
Having paid their lobbyists to play our elected executive and legislative representatives "ladies of the evening" these sleazy streetwalkers will still be wandering the red, white and blue District of Columbia singing "Lady Marmalade" even if every corrupt crony capitalist corporate plutocrat oligarch hole is plugged.
Perhaps there is need for a French style revolution with pitch forks and guillotines to "Free their minds, so that their "buttocks" shall surely follow".
Having paid their lobbyists to play our elected executive and legislative representatives "ladies of the evening" these sleazy streetwalkers will still be wandering the red, white and blue District of Columbia singing "Lady Marmalade" even if every corrupt crony capitalist corporate plutocrat oligarch hole is plugged.
Perhaps there is need for a French style revolution with pitch forks and guillotines to "Free their minds, so that their "buttocks" shall surely follow".
4
If one goes around the corner to Timothy Egan's prescient op-ed on our Dumbed Down Democracy it would be easy to infer that nearly all Americans haven't a clue as to what the carried interest loophole is.
Kudos for Mr. Parricof speaking against his/our overlords but will they make changes as they are the only ones that can? If the growing Dumbed Down model continues then forgetaboutit.
Even a "flaming liberal" will take every advantage of tax code until alterations take hold. That's American as Apple pie.
Kudos for Mr. Parricof speaking against his/our overlords but will they make changes as they are the only ones that can? If the growing Dumbed Down model continues then forgetaboutit.
Even a "flaming liberal" will take every advantage of tax code until alterations take hold. That's American as Apple pie.
3
The American people do not need a "meaningful message," especially in an article advocating for the status quo on capital gains. They need comprehensive tax reform.
1
What a politician says from either party during an election campaign tells us nothing about what they will actually do once elected. The Bushes, Obama, the Clintons and Trump have been long time allies of Wall Street and neither is going to shoot their golden goose.
Americans want to know the truth. However, once a meme becomes a "fact" in our head, in the form of political propagation, meaning we are told something, which is easy to accept, we have a hard time believing that the opposite is true, even when it never happens as promised. Our reasoning goes automated like a heat-seeking missile, pre-programmed to hit its target to satisfy a purpose. A person is pre-programmed to satisfy an emotional purpose.
Americans want to know the truth. However, once a meme becomes a "fact" in our head, in the form of political propagation, meaning we are told something, which is easy to accept, we have a hard time believing that the opposite is true, even when it never happens as promised. Our reasoning goes automated like a heat-seeking missile, pre-programmed to hit its target to satisfy a purpose. A person is pre-programmed to satisfy an emotional purpose.
2
The rational for taxing capital gains at lower rates than ordinary income changes with the economic climate. When I studied tax law in school, the rational for the capital gains rate differential was that it protected investors from inflation. Inflation was much higher way back then. Taxing capital gains at ordinary rates when much of those gains were merely from inflation was in effect a tax on inflation. Thus the rate differential
Now, with inflation at record lows, the rational du jour is to reward risk taking and investment, even if that investment carries little or no risk. Or maybe that was the rational before the inflation argument. It's changed so much that I can't remember.
The real reason for the capital gains rate differential? That's easy! It's to cut taxes on the donor class--who just happen, by sheer coincidence!--to earn most of their income from capital gains.
The only solution is to tax capital gains and investment income at the same rates as ordinary income. Taxing them at lower rates is nothing but punishing people who hold jobs and work for a living.
Now, with inflation at record lows, the rational du jour is to reward risk taking and investment, even if that investment carries little or no risk. Or maybe that was the rational before the inflation argument. It's changed so much that I can't remember.
The real reason for the capital gains rate differential? That's easy! It's to cut taxes on the donor class--who just happen, by sheer coincidence!--to earn most of their income from capital gains.
The only solution is to tax capital gains and investment income at the same rates as ordinary income. Taxing them at lower rates is nothing but punishing people who hold jobs and work for a living.
77
For those us who saved and invested and now are required to sell a proportion of our investments every year in retirement because it is our salary replacement, the lower capital gains rate is at least reasonable. And should our house need a new roof, for example, we have to sell more stock, pay a higher tax rate and then higher Medicare deductions because we have a "higher" income. If we had to pay regular income tax rates on our gains in retirement, that would really hurt, especially when the investments were made with after tax income. So if the consensus becomes to change capital gains rates, it should be less for the elderly retirees.
By the way, we still paid a higher tax rate than Mitt Romney and probably a lot higher than Trump.
By the way, we still paid a higher tax rate than Mitt Romney and probably a lot higher than Trump.
1
Thank you, Garak, for the historical perspective. Reasons for doing things change over time. "Anticipated" capital gains (and losses) should be computed and taxed annually, as are ordinary wages, on investments enduring 12 or more months. But what about investments in a lived-in residence (only one), or a family-owned farm or family-owned and operated small business? Carefully defined, such "investments" could be taxed differently (i.e., a capital gain or loss rate) when ownership transfers after more than 60 months' investment. Should the gain or loss of such properties occur on ownership transfer after one year but less than five years, the gain (or loss) would revert to "ordinary income".
However -- that "capital gain" must also be determined using an "inflation (deflation) index". Again, thank you, Garak!
However -- that "capital gain" must also be determined using an "inflation (deflation) index". Again, thank you, Garak!
1
The "REWARD" from any "risk" is what you EARN. If the risk is big, and you win, then there's your payoff.
Then you must PAY the tax on what you earn. No matter how you earn it: winning it, stealing it, earning it, inheriting it, etc.......
Then you must PAY the tax on what you earn. No matter how you earn it: winning it, stealing it, earning it, inheriting it, etc.......
1
To all those whose only comment is to suggest that the author pay more to the US if he thinks the carried interest rule is not right:
Do you think the carried interest rule is right or should it be changed?
Do you think the carried interest rule is right or should it be changed?
7
It should be changed. But if the author is principled and sincere, he could still pay the extra taxes.
The comments by people suggesting voluntary payment are trying to privatize taxation, undoing the very nature of the constitutional authority.
1
Not trying to privatize taxation. Just saying you can always pay more taxes that the government requires.
Sure, now that you're about 85 years old and have taken advantage of a blatantly unfair loophole for almost 50 years to build a fortune that could educate cities you come out against it. Where was your sense of fairness 46 years ago when your accountant told you you could underpay your taxes vs. ordinary Joe?
14
Alan, please feel free to write a larger check to the IRS. If you feel that you should pay more taxes, you do not need a new tax law to do that. Please do not insult our intelligence.
5
So we make fairness optional? Let the standard be unfair and those few who care become exceptions?
1
Now what about capital gains.........there is no good reason to tax them at a lower rate than ordinary income.
5
Wow. You are that rare person who sees past self interest. Wow. Wish there were more people like you around. Wow. Thank you. Made my day.
5
And it only took him 50 years.
Such determination.
He's a real, oh what's the word, Maverick.
Such determination.
He's a real, oh what's the word, Maverick.
1
Nothing stops you from paying a higher rate. The Treasury would gladly accept your voluntary contribution
5
Simply: Thank you.
3
How brave of you sir- to speak up about this 46 years later, at the end of your career, when it doesn't matter to you anymore. You stand with Mr Trump in your sacrifice for this nation. Well done!
12
Well said! Thank you.
1
>>>
As long as the GOP tea partiers and Ryan remain in control of the House, there shall be no closing of any tax loopholes, but there will be cuts in social spending. Again their motto is: the poor have too much money and the rich not enough.
The sadistic GOP's Anti-Jesus plan is quite simple, high deficit spending and tax cuts for the well heeled equates to low or no social spending (i.e., "big gov't).
Ref: Bush 2000 tax cuts.
The GOP knows that with low debt and even the possibility of surpluses social spending will happen, better schools, shoring up Social Security, pot holes fixed.................
Pretty simple
As long as the GOP tea partiers and Ryan remain in control of the House, there shall be no closing of any tax loopholes, but there will be cuts in social spending. Again their motto is: the poor have too much money and the rich not enough.
The sadistic GOP's Anti-Jesus plan is quite simple, high deficit spending and tax cuts for the well heeled equates to low or no social spending (i.e., "big gov't).
Ref: Bush 2000 tax cuts.
The GOP knows that with low debt and even the possibility of surpluses social spending will happen, better schools, shoring up Social Security, pot holes fixed.................
Pretty simple
7
What? A VC striking a note for 'fairness' in taxation? Impossible!
1
Not mentioned in this article is the fact that it is the Democrat senators from NY, NJ, and CT who are responsible for maintaining the carried interest loophole.
4
Close the loophole, Obama.... and take some heat off Hillary.
3
Give a little to keep a lot.
Well you guys make the rules. Tell your congressmen.
5
I am all for doing away with this wholly unjustifiably tax loophole. But I must append two points:
1) ON CAPITAL HILL, YOUR FRIENDS AREN'T ALWAYS YOUR FRIENDS. Most people think Chuck Schumer is a progressive man, but then again most people don't read the Times and if they do look at the times, they skim most of it. Chuck Schumer and other supposedly progressive members of Congress had been backing this loophole for years. That's part of the reason why so many of we Sanders supporters believe that so much liberalism it utterly bogus and counterfeit. And, by the way, Chuck Grassley, a conservative Republican from the Mid West has been against the carried interest giveaway for ages.
The author notes:
"Our current political and cultural environment is marred by a toxic belief that the country’s economic order is rigged against ordinary Americans — that the world of high finance unjustly supersedes their rights, needs and wants.
A new report by Gallup found that 86 percent of Americans agreed that members of Congress paid too much attention to what their major financial contributors wanted them to do. It feeds the cynicism that is fraying our democracy. "
Our belief that the system is rigged is not a jaundiced, cynical outlook; It is a valid conclusion. Recently, I read an article that said that the most successful stock portfolios are those of US Senators. They get inside information all the time; it's the nature of their work.
1) ON CAPITAL HILL, YOUR FRIENDS AREN'T ALWAYS YOUR FRIENDS. Most people think Chuck Schumer is a progressive man, but then again most people don't read the Times and if they do look at the times, they skim most of it. Chuck Schumer and other supposedly progressive members of Congress had been backing this loophole for years. That's part of the reason why so many of we Sanders supporters believe that so much liberalism it utterly bogus and counterfeit. And, by the way, Chuck Grassley, a conservative Republican from the Mid West has been against the carried interest giveaway for ages.
The author notes:
"Our current political and cultural environment is marred by a toxic belief that the country’s economic order is rigged against ordinary Americans — that the world of high finance unjustly supersedes their rights, needs and wants.
A new report by Gallup found that 86 percent of Americans agreed that members of Congress paid too much attention to what their major financial contributors wanted them to do. It feeds the cynicism that is fraying our democracy. "
Our belief that the system is rigged is not a jaundiced, cynical outlook; It is a valid conclusion. Recently, I read an article that said that the most successful stock portfolios are those of US Senators. They get inside information all the time; it's the nature of their work.
5
Excellent thoughts---nobly expressed---and it ain't gonna happen. Ending carried interest was (of course) all the rage during '08 and all the leading Democratic presidential candidates called for its end.
http://dealbook.nytimes.com/2007/07/13/clinton-calls-for-end-to-carried-...
If it didn't happen when the Democrats had command of the Congress and the White House after that election, then why in the world would anyone expect it to happen now? Because everyone's scared of Bernie/Trump "populism"? Because fine people like Mr. Patricof have been born again?
Because maybe this time they understand that Everyday Americans seeking to fulfill their God-given potential really, really are fed up with the blatant unfairness of this form of federal giveaway?
Maybe. But on the other hand, we're talking about real money here and real money that would be taken from the real people who matter--Wall Street, the Donor Class, the financial sector "innovators"----you get it. And toss in for good measure likely Senate Majority Leader Chuck Schumer. So will this time be different? No reason to believe it will, but maybe we'll all be surprised. Maybe.
http://dealbook.nytimes.com/2007/07/13/clinton-calls-for-end-to-carried-...
If it didn't happen when the Democrats had command of the Congress and the White House after that election, then why in the world would anyone expect it to happen now? Because everyone's scared of Bernie/Trump "populism"? Because fine people like Mr. Patricof have been born again?
Because maybe this time they understand that Everyday Americans seeking to fulfill their God-given potential really, really are fed up with the blatant unfairness of this form of federal giveaway?
Maybe. But on the other hand, we're talking about real money here and real money that would be taken from the real people who matter--Wall Street, the Donor Class, the financial sector "innovators"----you get it. And toss in for good measure likely Senate Majority Leader Chuck Schumer. So will this time be different? No reason to believe it will, but maybe we'll all be surprised. Maybe.
3
Why all the complaints about Senator Chuck Schumer? While, yes, he shares the blame owed to 534 other individuals, he is, after all, the Senate MINORITY Leader ... at least, until after Election Day.
Good luck with this - neither Hillary or Trump have any interest in doing anything for the lower or middle classes.
1
I agree with Alan. The "at risk" test is a prominent part of the tax code in section 465, for the basis of stocks and debt, and for partnerships.
A tax code with fewer exceptions is a simpler tax code, and therefore a better tax code.
A tax code with fewer exceptions is a simpler tax code, and therefore a better tax code.
2
Carried interest is an insult to all taxpayers. Carried interest tax rates promote speculation and bubbles in the economy. Carried interest adds to the tax burden of taxpayers who must work. Carried interest increases the budget deficit. Carried interest cannot be conferred on a handful of privileged individuals unless Congress is corrupt.
7
Obviously, carried interest should be taxed as ordinary income. Duh.
More importantly, capital gains and dividends should be taxed that way also.
Glad to see Mr.Patricof wants to "demonstrate a little more patriotism, and a greater sense of fairness, even if it affects our pocketbooks", but I seriously doubt the rest of his profession agrees with him on that.
Looking at the millionaires running Congress and the millionaires running for President one must be very naïve to believe anything will change in the near future despite their pandering rhetoric.
More importantly, capital gains and dividends should be taxed that way also.
Glad to see Mr.Patricof wants to "demonstrate a little more patriotism, and a greater sense of fairness, even if it affects our pocketbooks", but I seriously doubt the rest of his profession agrees with him on that.
Looking at the millionaires running Congress and the millionaires running for President one must be very naïve to believe anything will change in the near future despite their pandering rhetoric.
14
The Carried Interest Scam will never be fixed because both parties are financed in part by guys who use this provision. Both Trump and Clinton talk about it but talk is cheap. Just like Clinton now being against TPP, knowing full well it will pass in the lame duck congress. Just think of what our Government can do with that extra money collected by elimination of Carried Interest, Medicaid and Medicare can pay Heather Brecsh and Mylan $600 for more EpiPens.
7
Quick! Ignore how much Wall St. Money Hilary is getting. Let's be realistic. She's not going to end this. She's saying what the polls say she should.
1
As is evident from this op- Ed, if you open your eyes, there are people on what is grouped as "Wall Street" who support progressive changes to our tax code.
Hillary Clinton will do it. Best way to insure it happens is to vote against all Republican incumbents to give Democrats control of the agenda in Congress.
Hillary Clinton will do it. Best way to insure it happens is to vote against all Republican incumbents to give Democrats control of the agenda in Congress.
3
Thank you, Mr. Patricoff. It's one thing to enjoy capital gains treatment when your capital is at risk but playing with other people's money and having your portion of the profit taxed as if you wrote a check is a ridiculous loophole that should have been closed long ago.
6
Bravo. Let us see how your peers react. "It all comes back to fairness." Frankly, if we really mean that, it is time for tax clawbacks. I cannot see why not.
2
Amen. Congress should "just do it."
3
I suggest, Mr. Patircof, that you estimate the amount of taxes you should have paid on the "ordinary income" your earned over the years and donate that amount to a homeless shelter, food bank or children's hospital.
5
Hats off to you Mr. Patricof,
You are the rarest breed of investor - a private equity VC with a conscience.
You are the rarest breed of investor - a private equity VC with a conscience.
3
Agreed, and please feel free to pay now as much as you wish. Many Americans will be grateful.
4
amen. A courageous man as he will be criticized by his peers.
3
Laudable, but not nearly enough. What's Mr. Patricof waiting for? He can make his payment online today at www.pay.gov
Even better, ask his accountant to do the math, make the payment retro. Sure, it'll be extreme patriotism, but Mr. Patricof can look forward to waking up every morning, refreshed after a good night's sleep, feeling like a million bucks. After tax.
Then he can share the secret of his new-found happiness with similar others. First caller, Mr. Warren Buffet from Omaha Nebraska, go ahead with your question.
Even better, ask his accountant to do the math, make the payment retro. Sure, it'll be extreme patriotism, but Mr. Patricof can look forward to waking up every morning, refreshed after a good night's sleep, feeling like a million bucks. After tax.
Then he can share the secret of his new-found happiness with similar others. First caller, Mr. Warren Buffet from Omaha Nebraska, go ahead with your question.
9
Mr. Patricof, nice of you to speak up after benefitting handsomely from at least 23 years of the carried interest rule. You are now in your 80s, and have been among the most prominent venture capitalists for 50 years.
But you urge your fellow fund managers to be "more patriotic?" As if losing the carried interest rule would be a magnanimous sacrifice? Bull.
As you yourself circuitously admit, the carried interest rule has always been a lie. Not only do those benefitting from the rule NOT risk their own capital, but in the years a fund may have a capital loss, fund managers loss NOTHING. And, managers still earn their management fee. Only limited partners ever take a loss.
So again, so nice of you to finally say something, after slaking your thirst so long at the trough. But the time to be "patriotic," Mr. Patricof, was in 1993, when the carried interest rule went into effect. That was also the time to be honest.
How many billions have you and your fellow fund managers dishonest collected (not earned) because of the carried interest rule? And please, the Treasury did not come up with this rule on its own. Fund managers lobbied heavily for it, and have continued to lobby to keep it in place.
You know what would be brave, honest and patriotic, Mr. Patricof? For fund managers to re-fund all that un-earned carried interest profit back to the Treasury.
You earned your wealth, Mr. Patricof. But you didn't earn your excess wealth. You know this.
But you urge your fellow fund managers to be "more patriotic?" As if losing the carried interest rule would be a magnanimous sacrifice? Bull.
As you yourself circuitously admit, the carried interest rule has always been a lie. Not only do those benefitting from the rule NOT risk their own capital, but in the years a fund may have a capital loss, fund managers loss NOTHING. And, managers still earn their management fee. Only limited partners ever take a loss.
So again, so nice of you to finally say something, after slaking your thirst so long at the trough. But the time to be "patriotic," Mr. Patricof, was in 1993, when the carried interest rule went into effect. That was also the time to be honest.
How many billions have you and your fellow fund managers dishonest collected (not earned) because of the carried interest rule? And please, the Treasury did not come up with this rule on its own. Fund managers lobbied heavily for it, and have continued to lobby to keep it in place.
You know what would be brave, honest and patriotic, Mr. Patricof? For fund managers to re-fund all that un-earned carried interest profit back to the Treasury.
You earned your wealth, Mr. Patricof. But you didn't earn your excess wealth. You know this.
5
Based on frequent comments here at the Times I expect that since you are well off you must own a Congressman already. So the easiest solution would be for you to just call him or her and get it done.
3
There is no law against paying more taxes than you owe. If Mr. Patriof wants to treat his carried interest as ordinary income, he should just go ahead and do it.
7
Dear Mr. Patricof
Please feel free to calculate the amount you would pay if there is no loophole and send the extra to the US Treasury. They are always glad to receive donations from decent, honest Americans such as yourself.
Or do you figure that nothing really will change and that this is a way to look good and you will not have to pay a dime?
In other words, "put up or shut up"
Please feel free to calculate the amount you would pay if there is no loophole and send the extra to the US Treasury. They are always glad to receive donations from decent, honest Americans such as yourself.
Or do you figure that nothing really will change and that this is a way to look good and you will not have to pay a dime?
In other words, "put up or shut up"
6
The Golden Rule: "He who has the gold, makes the rules"
6
I didn't see where in the article Patricof said he was sending in a voluntary check to the IRS for what he saves from this tax provision. Make me virtuous, but not just yet, I guess.
5
Good start. Now lets talk about the real hypocrisy, as led by people like Grifter Warren Buffet and his puppets in the government.
Buffet is constantly calling for higher tax RATES for "people like him". He is a liar. People like him never have to take taxable gains because he has so much money he doesn't have to sell. He can generate cash by borrowing agains his assets if he needs cash. So when he talks about "higher rates" it will basically hit people making $250,000 or so, well off but not rich by any measure.
I have a tax for you Warren: For anyone with a net worth of over $1billion dollars, pay a 50% tax on the increase in the value of your investments each year. Based on recent estimates of your net worth of 65 billion, I calculate you would owe the government $32 billion (first billion exempt then 50% of $64 billion). Deal? You can make the check out to US Treasury. Also your buddy Bill Gates would owe $39billion and Mark Zuckerberg $26billion.
Buffet is constantly calling for higher tax RATES for "people like him". He is a liar. People like him never have to take taxable gains because he has so much money he doesn't have to sell. He can generate cash by borrowing agains his assets if he needs cash. So when he talks about "higher rates" it will basically hit people making $250,000 or so, well off but not rich by any measure.
I have a tax for you Warren: For anyone with a net worth of over $1billion dollars, pay a 50% tax on the increase in the value of your investments each year. Based on recent estimates of your net worth of 65 billion, I calculate you would owe the government $32 billion (first billion exempt then 50% of $64 billion). Deal? You can make the check out to US Treasury. Also your buddy Bill Gates would owe $39billion and Mark Zuckerberg $26billion.
6
Tom - similar to the provision to tax "anticipated" capital gains on investments on an annual basis as ordinary income. Income rates should be progressive -- up to 50%...more? And should there be exceptions such as the owner-occupied residence, or the family-owned and operated farm and small business?
Forget about "retroactivity" -- two wrongs don't make a right!
Forget about "retroactivity" -- two wrongs don't make a right!
Bravo. This my fellow posters is true patriotism.
6
Alan Patricof should be commended for his forthrightness and honesty. I'm sure he must be very popular with his fellow hedge fund managers!
4
Please remember, he said nothing in 1980, 1990, 2000, 2010 or last year.
He reaped the benefit of the carried interest for almost 50 years and now that his bank account is bursting at the seems he has had a change of heart.
The guy's a hypocrite.
Don't fall for his gnashing of teeth...it's theater.
He reaped the benefit of the carried interest for almost 50 years and now that his bank account is bursting at the seems he has had a change of heart.
The guy's a hypocrite.
Don't fall for his gnashing of teeth...it's theater.
1
I have not yet seen a "...but that is taxing me twice!" comment from a right leaner about taxes on investments.
Did they finally give up on this absurd piece of garbage?!
Did they finally give up on this absurd piece of garbage?!
4
That's because it has no relevance to this tax. There is no double taxation. Your thinking of estate taxes which is a tax on a tax!
1
The author seems willing to give the politicians more money to distribute to their "courts"
Brilliant!
Brilliant!
3
Americans deserve a tax code that is both fair, rational and that reasonably advances legitimate public policy. Time for the carried interest loophole to be closed. As well as other loopholes that have no legitimate purpose other than favoring those with enough money to buy laws from Congress.
Kudos to someone like Mr. Patricof for supporting something clearly against his own self-interest.
PS. Release Your Tax Returns, Mr. Trump. I am sure we will see a plethora of loopholes that need to be closed.
Kudos to someone like Mr. Patricof for supporting something clearly against his own self-interest.
PS. Release Your Tax Returns, Mr. Trump. I am sure we will see a plethora of loopholes that need to be closed.
3
How about shutting off the dozens of different types of "trusts" that allow extremely wealthy people to hand over gigantic fortunes with paying any taxes on them? Sam Walton passed on a fortune of nearly $100 BILLION to his wife and children without paying a dime in taxes. That is a formula that allows (and has allowed) the wealthiest Americans to create a permanent upper class aristocracy. It is not healthy for our democracy and it's not really good economics either.
6
Great point. The NY Times could have 100 Op Ed's on this topic. When Trump mentioned the elimination of the estate tax, I laughed. Wealthy people don't pay this. Jackie Kennedy Onassis left a $450 million estate in 1994 and did not pay a dime in inheritance tax due to the use of trusts.
Thank you Mr. Patricof. We know of someone who made
$38.4Mm last year (carried interest) whose effective tax rate (federal, state and local) was approximately 22.4%.
The person in question is law abiding and has not done a single thing wrong or illegal.
In my opinion there is something so profoundly wrong when people who work just as hard, but for a salary, have to pay a higher percentage of their typically much lower salaries than people like the ones I mentioned.
$38.4Mm last year (carried interest) whose effective tax rate (federal, state and local) was approximately 22.4%.
The person in question is law abiding and has not done a single thing wrong or illegal.
In my opinion there is something so profoundly wrong when people who work just as hard, but for a salary, have to pay a higher percentage of their typically much lower salaries than people like the ones I mentioned.
3
It'a great that Mr. Patricof is speaking up. But, I can't help but note that nothing is forcing him to take advantage of the loophole he writes about.
4
Obama could end the carried-interest loophole with a pen stroke.
Why doesn't he?
Answer: Donations from hedge fund managers for his Presidential library are more important to him than the public interest.
Why doesn't he?
Answer: Donations from hedge fund managers for his Presidential library are more important to him than the public interest.
1
I admit to ignorance about the federal tax code, so this might be a naive notion. Is there anything to prevent the author of this piece from paying more to the IRS than he owes? Of course he could distribute his wealth by donations and other means, but would the IRS reject a purposeful overpayment?
3
It has always seemed like a no brainer to tax the hedge fund managers just as the man says but it like the movie,Groundhog Day , it just keeps happening day after day and here is this guy begging for a change and no one is listening. This speaks to the power of money and no matter how much we underlings try to save and invest we will never have the wealth they do unless we win the lottery. Fat chance. Thanks for writing this article fella.
2
Stop insulting the millions of people who work for a paycheck and classify ALL income as taxable. Eliminate capital gains completely, take away deductions for lobbying and campaign contributions and overturn the laws allowing corporate 'inversions', and pour the revenue into infrastructure, education and R&D spending Watch the budget deficit slowly erode, underemployment drop and achievement scores increase. But of course, that would make the richest 100,000 people in the country unhappy, and we can't have THAT can we?
3
Thanks for the unselfish point of view. It does make one lament that our elected representatives can't even make the most obvious improvements in our tax laws. Would you like to run for office?!
1
Service income is ordinary income.Why should I invest in a hedge fund ,real estate fund or private equity fund and be taxed at a higher rate that the(effectively)financial advisor who selects my securities, real estate or company to take private?He or she is performing a services.He or she are not investing.Services are taxed at ordinary income rates for ordinary cirizens, whether lawyers,doctors,teachers,or any municipal worker.
While closing the 'carried interest loophole' would be symbolic, we would be better served by raising our social and political goals beyond that of mere symbolism, and eliminating public corruption more broadly.
Here's an idea for a debate:
An actual entrepreneurial genius such as Mr. Patricof who earns a living by taking risky positions against a foundation-cosseted fat cat such as Grover Norquist who has never had to survive at or near the front lines of capitalism.
Toward that end, Mr. Patricof, I suggest that you pledge that in 2017 you will donate the difference between the carried interest tax you're assessed and the tax you believe you should have paid to a nonpartisan entity that will oversee, WWF style, debate match-ups between, say, Mitch McConnell and Warren Buffett, or Paul Ryan and Bill Gates.
When a person has amassed more capital than he or his progeny might ever spend, he appears to have two choices: 1) Use that money and influence to accrue even more money and influence, a la Koch; or 2) Find and fund a charity near and dear to his heart. It sounds, Mr. Patricof, that you lean toward the second pursuit. I urge you as an admirer and ideological colleague to wait not a minute longer to demonstrate how private money can contort public policy, in your case for the better.
Good day and good luck.
An actual entrepreneurial genius such as Mr. Patricof who earns a living by taking risky positions against a foundation-cosseted fat cat such as Grover Norquist who has never had to survive at or near the front lines of capitalism.
Toward that end, Mr. Patricof, I suggest that you pledge that in 2017 you will donate the difference between the carried interest tax you're assessed and the tax you believe you should have paid to a nonpartisan entity that will oversee, WWF style, debate match-ups between, say, Mitch McConnell and Warren Buffett, or Paul Ryan and Bill Gates.
When a person has amassed more capital than he or his progeny might ever spend, he appears to have two choices: 1) Use that money and influence to accrue even more money and influence, a la Koch; or 2) Find and fund a charity near and dear to his heart. It sounds, Mr. Patricof, that you lean toward the second pursuit. I urge you as an admirer and ideological colleague to wait not a minute longer to demonstrate how private money can contort public policy, in your case for the better.
Good day and good luck.
1
If this has been going on for 46 years (as per article) it certainly shows indifference.
1
Why can't Obama close this loophole using executive action? In India, we have a proverb, which translated into English means "In this world, everybody is naked".
2
While your intentions seem patriotic, the fact that this "moment of clarity" comes toward the end of your career is laughable. For decades you and others like you have massively benefited financially from these loopholes. I'm sure you were dreaming up this op ed in the 80s and 90s, right? You are the source of the term "limousine liberal". Do us all a favor and answer this question: how much money have you personally made from the carried interest tax benefit? Put that answer in your next op ed or even publish it in the comments here....and then by all means lecture us on how Congress should do away with the loop hole.
4
Mr. Patricof, put your money where your mouth is. The U.S. Treasury will be delighted to accept your annual gift equal to the excess of the tax on your income at ordinary rates over the tax you pay at the capital gains rate. That would, of course, leave less money for you to donate to Hillary Clinton's campaign and the other Democrat causes and candidates you have so long generously supported. But your country needs your money more than your party does. And let me tell you, as a high income professional who works eighty hours a week only to see half of it taxed away by the state and federal governments at ordinary rates, it will feel really good to know that more of the fruits of your hard work are being so wisely redistributed.
4
That's what you say in public, but in private I'm sure it's the whole 47% moocher stuff, wait that's outdated, it's now 51% moocher.
2
This is refreshing, coming from a hedge fund manager, although he ultimately calls the move "symbolic." All said, Mr. Patricof's perspective has the right vantage point for the country. Thank you.
1
If you want to sacrifice yourself, nail yourself to a cross. The politics of life, liberty and the pursuit of happiness is a radical rejection of millenia of enforced suffering. Leftism is social Christianity. Americans need a philosophical revolution to complete and protect the one in 1776. See: Atlas Shrugged for man-worship instead of man-hatred.
As a high school student, Chuck Schumer thought there ought to be an "Honesty Party." He forgot about that a while back. Well, that's what 30 years in politics will do to some folk. As far as fixing this loop-hole for the 1/10-percenters, he opposed it.
http://www.nytimes.com/2007/07/30/washington/30schumer.html
http://www.nytimes.com/2007/07/30/washington/30schumer.html
4
No income tax should be levied up to some set income, say $250,000. This would eliminate distinctions between earned and unearned income. It may also prevent unethical contortions by corporations to help their highly compensated people avoid supporting the country they live in. All other income, from every source including stock options, should be taxed at progressively increasing rates upto about $1,000,000. A which point we can collectively say you have benefitted enormnously from this society and set the tax rate at 90%.
By the way, let me FTFY: "Our current political and cultural environment is marred by the acknowledgement that the country’s economic order is rigged against ordinary Americans... ."
By the way, let me FTFY: "Our current political and cultural environment is marred by the acknowledgement that the country’s economic order is rigged against ordinary Americans... ."
2
There is no justification for taxing carried interest at the capital gains rate. But there is also no justification for taxing capital gains at the capital gains rate. Investors endure risk, but laborers endure labor and often risk, too.
We need one tax rate for all income above some base amount, no loopholes. If Congress wants to raise the rate, they would have to raise it for all; all Americans would be one interest group with respect to taxes.
We need one tax rate for all income above some base amount, no loopholes. If Congress wants to raise the rate, they would have to raise it for all; all Americans would be one interest group with respect to taxes.
1
Bravo! Finally an industry executive publicly admitting that his firm, and his industry, are benefitting from a tax loophole that is inherently unfair to the American people, and to the detriment of the federal budget. I hope more beneficiaries of this outdated law speak up and offer to pay their fair share.
2
I've just started reading the comments and have found 2 that advocate "voluntarily" paying more in taxes. That is so outside of what this argument is about to me, and i think most Americans.
To us, the argument is about rules and fairness, not at all about what someone does out of bounds, whether what that person does is good, bad or great.
There is always room for goodness, and volunteerism. We just need to push the smart alecks aside to make room for it
To us, the argument is about rules and fairness, not at all about what someone does out of bounds, whether what that person does is good, bad or great.
There is always room for goodness, and volunteerism. We just need to push the smart alecks aside to make room for it
3
Finally somebody with the guts to denounce a loud secret, the unfair loopholes the rich and powerful benefit from, all the while enjoying the public goods and services at par with everybody else. Fairness, thus far, has been paid lip service. Its time we face squarely the rising inequality a capitalistic system engenders, capital trumping labor, and its inequities.
1
Hats off to Mr. Patricof for his entirley reasonable proposal that the 1% income hedge fund managers should pay thier taxes under the same rules as the accountants, secretaries and clerks who work for them already pay. Warren Buffet and Mr. Patricof and others who have realized great wealth through financial endeavors with other's money should push Congress on this issue - it's purely a matter of fairness.
1
I'll support eliminating carried interest if we simultaneously get rid of the most unfair and egregious aspect of the tax code which is progressive rates. The only fair tax is a flat tax.
2
The blind man who takes the gift of 100 pencils, and sells them for 5 cents each at the subway entrance, should his $5.00 be taxed the same as the profit of a person who invested $1,000 in Apple, Inc in 2008, and sold it in 2016 for $7,700? Would that life...and taxes...were so simple!
There are so many things wrong with America's tax policy, this is certainly one of them. It will be great to have it fixed. To me, income is income, and should all be taxed at the same rate.
1
Very noble proposal by Mr. Patricof, but I have absolutely no confidence that Congress will ever address tax equity. Given Congressional elections cost in excess of 1 million dollars, our congressional pols will always be in the hip pocket of lobbyists, special interests and campaign donors.
3
How about a follow up story by the Times. Ask every one of the 1% you can find (or even the 0.1, or the 0.01%) and ask for their views on this. Categorise them by Support, Oppose, "No Comment" and refused to comment / did not answer.
I'd like to know what my Bankers and Advisors think of this. I'd also like to know which bankers and advisors deserve my investments.
I'd like to know what my Bankers and Advisors think of this. I'd also like to know which bankers and advisors deserve my investments.
2
Bravo Mr. Patricof. How refreshing to find someone in the financial world who supports taxing carried interest as ordinary income. It truly is all about fairness in taxation.
Is it fair that income earned from investing is taxed at a lower rate than income earned from blood, sweat and tears? No it isn't fair.
2
It seems like every politician is against this loophole...and yet nothing happens. Here is an idea to make something happen. Instead of just closing it, a bill should propose closing it, and redistributing the money to the rest of the taxpayers directly, in the form of checks.
Then you'll see a lot more support for it in Congress.
Then you'll see a lot more support for it in Congress.
1
Here's an idea for a debate:
An actual entrepreneurial genius such as Mr. Patricof who earns a living by taking risky positions against a foundation-cosseted fat cat such as Grover Norquist who has never has to survive at or near the front lines of capitalism.
Toward that end, Mr. Patricof, I suggest that you pledge that in 2017 you will donate the difference between the carried interest tax you're assessed and the tax you believe you should have paid to a nonpartisan entity that will oversee, WWF style, debate match-ups between, say, Mitch McConnell and Warren Buffett, or Paul Ryan and Bill Gates.
When a person has amassed more capital than he or his progeny might ever spend, he appears to have two choices: 1) Use that money and influence to accrue even more money and influence, a la Koch; or 2) Find and fund a charity near and dear to his heart. It sounds, Mr. Patricof, that you lean toward the second pursuit. I urge you as an admirer and ideological colleague to wait not a minute longer to demonstrate how private money can contort public policy, in your case for the better.
Good day and good luck.
An actual entrepreneurial genius such as Mr. Patricof who earns a living by taking risky positions against a foundation-cosseted fat cat such as Grover Norquist who has never has to survive at or near the front lines of capitalism.
Toward that end, Mr. Patricof, I suggest that you pledge that in 2017 you will donate the difference between the carried interest tax you're assessed and the tax you believe you should have paid to a nonpartisan entity that will oversee, WWF style, debate match-ups between, say, Mitch McConnell and Warren Buffett, or Paul Ryan and Bill Gates.
When a person has amassed more capital than he or his progeny might ever spend, he appears to have two choices: 1) Use that money and influence to accrue even more money and influence, a la Koch; or 2) Find and fund a charity near and dear to his heart. It sounds, Mr. Patricof, that you lean toward the second pursuit. I urge you as an admirer and ideological colleague to wait not a minute longer to demonstrate how private money can contort public policy, in your case for the better.
Good day and good luck.
2
I just sent a comment that contained a typo. I'm going to fix it and re-send. Sorry about that.
Thanks Alan for telling the Saturday readers who don't already know what's going on with this stupid little loophole. I have no idea how much money will come into US coffers but it needs to happen and I suspect it will soon. Thanks for telling the truth and stepping up.
It is always surprising and refreshing to have folks with lots of money agree they should play fair -- and pay reasonable taxes on high earnings. Thank you. I expect you'll get a lot of grief for speaking the truth. You've got stones.
You could always behave like Trump and make up stories about why your tax returns are more tightly classified than the work of our intelligence agencies, but no one who has lived and worked in DC believes any of that crap.
While she was rightfully prosecuted for tax cheating and pushing the working public too far, I preferred Leona Helmsley's "only little people pay taxes" to Trump's lies about audits. (I'm not ruling out prosecuting Trump, but at least the queen of mean was up front about being a tax cheat.)
I know too much about the "musical chairs" played with most hotels and other businesses and it's a dirty game. Company A owns the land, B owns the building, C owns the hotel business, D & E own the restaurants, and F owns the parking concession. From there, things get complicated with silent partners and quiet business loans all the businesses. Only the parking garage always runs at a profit.
Even with the best real estate and business attorneys, there's no such thing as negotiating (in writing) in good faith. Someone sneaks into night court for a TRO one night, but they don't serve it until 16:50 on Friday evening.
It's a snake pit, like you'd expect from Trump.
All these folks should pay taxes like the rest of us.
You could always behave like Trump and make up stories about why your tax returns are more tightly classified than the work of our intelligence agencies, but no one who has lived and worked in DC believes any of that crap.
While she was rightfully prosecuted for tax cheating and pushing the working public too far, I preferred Leona Helmsley's "only little people pay taxes" to Trump's lies about audits. (I'm not ruling out prosecuting Trump, but at least the queen of mean was up front about being a tax cheat.)
I know too much about the "musical chairs" played with most hotels and other businesses and it's a dirty game. Company A owns the land, B owns the building, C owns the hotel business, D & E own the restaurants, and F owns the parking concession. From there, things get complicated with silent partners and quiet business loans all the businesses. Only the parking garage always runs at a profit.
Even with the best real estate and business attorneys, there's no such thing as negotiating (in writing) in good faith. Someone sneaks into night court for a TRO one night, but they don't serve it until 16:50 on Friday evening.
It's a snake pit, like you'd expect from Trump.
All these folks should pay taxes like the rest of us.
Thanks Mr Patricof, your words are laudadle, and full of common sense.Our National Parks are celebratind 100 years, wouldn't be a dream to use this money to maintain them, what a world of good could be done. for all. The future generations could sure benefit from it.
2
Of course, he calls for closing the tax dodge now; he's made his fortune (starting 46 years ago) and now wants to pull up the drawbridge to ill-gotten riches by pushing a higher tax tax burden onto younger versions of himself. Mr. Patricof's proposal would carry a lot more weight if he was willing to have the higher tax rates apply retroactively. Funny how "fairness" only applies to the other guy's tax bill.
44
The phrase "better late than never" comes to min here. We're talking about $2 billion. Sure, it won't make much of a dent in the national debt. But that's a lot of school lunches and books, just a couple of good ways to spend that money instead of allowing people who are not exactly wondering how to pay for their next lunch to keep it.
Better late than never. Better publicly stated.
Many thanks to patriots who understand that taxation is the way we ensure the common good.
Many thanks to patriots who understand that taxation is the way we ensure the common good.
Who says the letter writer not willing to be taxed retroactively, if others in his position are as well? And who says he hasn't been expressing his opinion about this over the past decades. And in any case, is it not praiseworthy for him to take this position now? You seem like someone who can find the cloud in front of every silver lining.
At the end of the day, it seems that in every election it comes down to "entitlements". The rich want less welfare, food stamps, and unemployment insurance, and the wealthy want lower taxes. Carried interest is one of those "entitlements" enjoyed by wealthy investors that has no societal value. So many thanks for taking the lead on this. My concern, however, is that 80% of the voting public will have no idea what carried interest is, so Hillary Clinton will use up her political capital on something the vast majority of Americans don't care about. But I value your integrity and if I were ever doing a capital raise for a startup, I'd want you backing me.
I have no meaningful opinion about the carried interest in the context of fund management as it is not my business, but I do have one in the context of real estate transactions, an area in which I have worked for decades.
I put together deals with investor capital and non-recourse debt. I find the deal, structure the financing, and handle the renovation, leasing and management, for which I receive a share of the deal's profits and nothing else. In almost every case, the investor capital is returned after a few years (sometimes in a matter of weeks), whereas my responsibilities continue until the deal is sold. Together, we are what the world has come to describe as 'partners'.
Under these circumstaces, to tax my wealthy partners at roughly half the rate at which I am taxed would be, from my perspective, unjust. The notion that 'capitals gains treatment' is intended to reward those risking capital sounds noble except for two things (among others) that come to mind: First, investing years of one's life without compensation except if success occurs is not all that different from investing capital. Second, now that I have achieved a measure of success, I am able to go to a bank, in some cases, and convince them to lend me 100% of the cost of a project on a non-recourse basis. The profits, despite the absence of any risk to my capital, are unarguably 'long term'.
Not all carried interest circumstances are the same.
I put together deals with investor capital and non-recourse debt. I find the deal, structure the financing, and handle the renovation, leasing and management, for which I receive a share of the deal's profits and nothing else. In almost every case, the investor capital is returned after a few years (sometimes in a matter of weeks), whereas my responsibilities continue until the deal is sold. Together, we are what the world has come to describe as 'partners'.
Under these circumstaces, to tax my wealthy partners at roughly half the rate at which I am taxed would be, from my perspective, unjust. The notion that 'capitals gains treatment' is intended to reward those risking capital sounds noble except for two things (among others) that come to mind: First, investing years of one's life without compensation except if success occurs is not all that different from investing capital. Second, now that I have achieved a measure of success, I am able to go to a bank, in some cases, and convince them to lend me 100% of the cost of a project on a non-recourse basis. The profits, despite the absence of any risk to my capital, are unarguably 'long term'.
Not all carried interest circumstances are the same.
13
the capital gainsExemption is intended to foster long-term investment. To encourage this it should be vested over a five-year period and indexed for inflation after that. If you double your money over 20 years but it would have been more than that if it sat in a bank account where is the fairness of taxing it at all.
The problem in your argument is the assumption that returns on capital should be taxed at a lower rate than earned income. Actual wealth is generated ONLY by labor, although in many cases, it requires the investment of capital to be effective (e.g. factories, the result of prior labor - just ask the bricklayer who worked through that hot spell in August). But there can be wealth without capital (just ask a hunter-gatherer who finished his last meal), but there can be no wealth without labor, being as any form of actual capital (that factory again) is the RESULT of someone's labor.
So why is capital more valuable than labor? It is a moral and ethical question answered badly in the United States since about 1980.
So why is capital more valuable than labor? It is a moral and ethical question answered badly in the United States since about 1980.
1
Beg to differ your first premise, at least. The work you do is analogous to a good, fully commissioned, consultative sales person negotiating, structuring and completing a large industrial equipment deal. No commission until the deal is done. When complete, that commission is ordinary income. Your payments are for work done, not the risk of your own investment. You get paid when your work is done, however long that is. That payment is ordinary income.
This article is a very one-sided view of taxation, namely, everything belongs to the government except what the government is willing to let you keep. That is not good tax policy.
In its purest form, government should use the power to tax solely for the purpose of raising the revenues it needs to function in a way that has the least impact on society and the economy. Unfortunately, things do not always turn out that way because government tends to use the power to tax for much more, including, the influencing of behavior and the advancement of policies the government wishes to favor. An interesting case in point was former Mayor Bloomberg's wish to tax soft drinks that had too much sugar, not as a revenue source but as a disincentive to consume those drinks.
Whether a carried interest is a tax loophole or not depends on where you stand. And it is simply a question of definition under the tax laws as to whether it is a capital gain or ordinary income. It makes very little difference whether this so-called loophole exists or not. The most important aspect of it is how does it fit in with our tax policy. If there is no good reason for and it has outlived its usefulness it can and should be revised.
In its purest form, government should use the power to tax solely for the purpose of raising the revenues it needs to function in a way that has the least impact on society and the economy. Unfortunately, things do not always turn out that way because government tends to use the power to tax for much more, including, the influencing of behavior and the advancement of policies the government wishes to favor. An interesting case in point was former Mayor Bloomberg's wish to tax soft drinks that had too much sugar, not as a revenue source but as a disincentive to consume those drinks.
Whether a carried interest is a tax loophole or not depends on where you stand. And it is simply a question of definition under the tax laws as to whether it is a capital gain or ordinary income. It makes very little difference whether this so-called loophole exists or not. The most important aspect of it is how does it fit in with our tax policy. If there is no good reason for and it has outlived its usefulness it can and should be revised.
4
The reason there is only a one sided view of taxation is because only one side has the money for $1000 dollar/ hour tax attorney and to lobby congress to keep loopholes for them in place.
Yes Mayor Bloomberg had a nanny state mentality about sugary drinks?
So what?
What does that have to do with ludicrous give away loopholes that only the wealthy can access?
Your pretense that somehow tax policy should be ideological neutral is severely undermined by the reality of people like Grover Norqist who are just fine with their anti tax for the wealthy ideology.
Yes Mayor Bloomberg had a nanny state mentality about sugary drinks?
So what?
What does that have to do with ludicrous give away loopholes that only the wealthy can access?
Your pretense that somehow tax policy should be ideological neutral is severely undermined by the reality of people like Grover Norqist who are just fine with their anti tax for the wealthy ideology.
2
Not so fast, thank you. Your thesis is a bit skewed. Some of us believe government has, and rightfully so, a role beyond "having the least impact on society and the economy." As a businessman I am ashamed to have spouted similar rhetoric for years: "less government...let free enterprise rule!" Now we see where that's gotten us. The sad truth is, much of what we refer to as "big business" can't be trusted at all. They believe, as you apparently do, that if left to their own devices, we would all be better off. Has it? Look at Mylan and Volkswagen as recent examples. Corporations' first responsibility is to their shareholders, as it should be. But government's first responsibility is to its citizens -- all of us. I want the government involved in my every day life: ensuring that my food is safe to eat, that my car is free of defects, and yes, that the pharmaceuticals I ingest have been (a) safety tested; and are (b) fairly priced.
You say it makes "very little difference" whether the carried interest loophole is closed, but you are incorrect. At the very least, it makes an $8 billion a year difference in lost tax revenue. And, to the billionaires who benefit from it, it enables them to further distance themselves from the rest of us. Is that a good thing? I suppose it depends, as you put it, "on where you stand."
You say it makes "very little difference" whether the carried interest loophole is closed, but you are incorrect. At the very least, it makes an $8 billion a year difference in lost tax revenue. And, to the billionaires who benefit from it, it enables them to further distance themselves from the rest of us. Is that a good thing? I suppose it depends, as you put it, "on where you stand."
2
Following your argument we should completely eliminate the concept of "capital gains" not just the carried interest. Not going to happen. So let's take what we can get in terms of common sense reform and call the carried interest what it is- a reward for labor.
Bravo for stating what has become patently clear to most Americans- its way past time to end the carried interest loophole that favors so few and sticks in the "craw" of most US taxpayers.
5
So what is preventing you from voluntarily paying more taxes? It's easy to be so self righteous when there are no actual consequences.
2
There is a difference between being self-righteous and right.
Mr. Patricoff is right.
Mr. Patricoff is right.
1
Donald Trump once promised, in a burst of populist hyperbole, to do away with the carried interest loophole. It was during the same period he regularly spouted off about "self-funding" his presidential campaign. He has changed is stance on this issue and his biggest indirect financial backer is now Robert Mercer, a billionaire hedge fund operator who lives for tax avoidance schemes. Mr. "self-funding" Trump has sold himself lock stock and barrel to the venture capital industry. You won't hear too much about carried interest from the Trump campaign anymore.
Any suckers still fall for that "self funding" routine from Don the Con?
Any suckers still fall for that "self funding" routine from Don the Con?
18
Our government has created "the eye of the needle" that invites the wealthy to make the pass.
Good for Mr. Patricof to see that it is not a particularly righteous path.
Good for Mr. Patricof to see that it is not a particularly righteous path.
4
So shady. So this guy has had an advantage of not paying current income tax rates for 46 years and *now* he has a problem with it? What a useless point of view because he already made his. And I am in full support of getting rid of this loophole. But Alan's argument is so weak.
6
It really upsets me to read about all these tax"loop holes." They are not mistakes at all, call it what it is: a regulation intended to specifically lower taxes. The carried interest should be taxed at the highest rate. It won't be long and all risk will be eliminated from investing, and the costs associated with it.
5
Pray tell what is the reason that "To the extent that venture capitalists and private equity investors have their own capital invested in their own or any funds, they deserve capital gains treatment, just as any other limited partner does."? Mr Patricof wants to do only half the needed job. As a major political donor will he pledge not to contribute to candidates such as Senator Schumer, who help perpetuate the unfair treatment of carried interests?
2
Thank you Mr. Patricof for writing an intellectually honest column about the carried interest loophole. I am also a beneficiary of this loophole and I would be the first to point out how unfair this loophole is. At its most basic carried interest is a bonus, paid when the investment you made on behalf of your investors, known as limited partners, performs well. For this good performance you receive a portion of the return. Critically, however, the venture capitalist put up none of his or her own money to get paid carried interest. Having capital at risk is a basic premise of receiving capital gains treatment - except of course when it comes to carried interest. If carried interest were truly worthy of capital gains treatment the venture capitalist should have the ability to receive a capital write-off on their taxes should they fail to receive a carried interest payment if their investments perform poorly. Of course this parallel treatment doesn't exist. Classic "heads I win, tails you lose" tax treatment, and on its face unfair to the millions of wage earners in this country who pay full freight on their earned income.
Last month in the NYT the CEO of New Mountain Capital argued that professional investors are entitled to this exemption because they work hard and are earning the equivalent of "sweat equity". This is nothing but self-serving nonsense. Time to change the carried interest rules to treat carried interest for what it is - earned income.
Last month in the NYT the CEO of New Mountain Capital argued that professional investors are entitled to this exemption because they work hard and are earning the equivalent of "sweat equity". This is nothing but self-serving nonsense. Time to change the carried interest rules to treat carried interest for what it is - earned income.
233
And I hope you are using your considerable efforts on your Congressman and Senator to bring this change about - as well as among your friends at the club.
1
"Sweat Equity" from sitting in front of a monitor, in the summer time, with no air conditioning; or playing golf in the rain.
"Rarely has a policy existed so long with such weak arguments in its favor."
What about taxing overseas US citizens? The USA is the only country in the world to do so, and it creates real complications and added costs for ordinary citizens making a living abroad.
But guess what - US does not tax overseas profits of US firms? Go figure!
Frankly, the whole tax system needs to be revised, and, yes, the carried interest rule needs to be done away with.
It will be good to see US politicians pay less attention to special interests and focus more on creating equitable laws.
What about taxing overseas US citizens? The USA is the only country in the world to do so, and it creates real complications and added costs for ordinary citizens making a living abroad.
But guess what - US does not tax overseas profits of US firms? Go figure!
Frankly, the whole tax system needs to be revised, and, yes, the carried interest rule needs to be done away with.
It will be good to see US politicians pay less attention to special interests and focus more on creating equitable laws.
4
Dividends and capital gains should be subject to preferred tax rates only up to a maximum gain of, say, $200,000 per year per tax payer. This would help people accumulate a nest egg and not need government support in old age. Beyond that amount, the system is clearly subsidising people who really, really don't need it.
5
so what is wrong with one tax that covers all of our debit, and responsibilities . the first $20.000.00 that you earn is tax free after that all income no matter wear it has come from is taxed at 10%. business is taxed at the same rate. home owners can only write off there first house, not there second . business can still have there usual write offs. this would simplify code. of corse there would need to be some tweaking but i think that this would be a good base.
2
Along the same track, I suggest that we reserve the capital gains incentive for only the initial purchasers of a corporation’s shares. Once the shares are traded, the incentive intended to reward the risk in capitalizing the business is no longer applicable. When people buy shares already in the market, whether they hold them for minutes or years, the increase in value is profit and should be fully taxed as such, and losses should be fully deductible.
4
The capital gains classification on shares should be reassigned to investments that actually provide capital to a business - the first time buyer of the share only. Those who pass paper around after should be seen gaining income.
4
As several other commenters have noted, the special tax rate for capital gains ought to be removed as well. Not just as a matter of fairness, but because that would be the biggest single change to simplify the tax system. If if made no difference if any given dollar was a capital gain or not, so much of the tax code and the effort spent complying with it would be irrelevant.
Lower rates for capital gains once made some sense, when some of a "gain" was really just inflation. With the low inflation we've had for years, and are likely to continue having, that one reason has long been gone.
Lower rates for capital gains once made some sense, when some of a "gain" was really just inflation. With the low inflation we've had for years, and are likely to continue having, that one reason has long been gone.
5
You will never see significant tax reform as long as the 1% are in charge and their lobbyists are filling the pockets of politicians. The current tax laws are an incentive for the little guys to cheat, since the system is indeed rigged in favor of the rich. Those of us who dutifully pay our fair share are losing our patience. We are the ones who feel cheated because we have to make up the funds not paid by the wealthy.
17
Wow! Surely taxing the super-rich at the same rate as ordinary people is socialism. The economy will implode, and so will our morals.
134
Don't worry Paul, never gonna happen. Congress knows who owns them.
I find the comments suggesting that anyone can pay more taxes if they want to to be simplistic. First one rich guy overpaying isn't going to make a difference in the grand scheme of things. More importantly such behavior would grant the less charitable and scrupulous a competitive advantage. One reason for the federal system is to promote fair(er) trade among the citizens in the States. I am not convinced that the tax code is the best way to regulate behavior; however, I do agree that the carried interest loophole is one to be closed.
63
I don't think there's much danger of " one rich guy overpaying". Closing the loophole represents a simple move to return to what it was originally supposed to do.
But thanks to mullah Norquist any change in tax code must be fought with the last drop of blood from the middle class
But thanks to mullah Norquist any change in tax code must be fought with the last drop of blood from the middle class
2
The tax code regulates behavior by design, the only question is whether we do it honorably or dishonorably.
I am not a financial professional by any means but the description of "carried interest" seems more like a performance bonus than return on investment.
7
One significant difference is that the carried interest owner does not have capital at risk - only risk is amount of earning with no risk of loss of invested capital.
3
It seems to me that one of the effects of the favored tax treatment of returns on capital is that it encourages hoarding perceived wealth (statements from one's broker), rather than actual wealth (one's house, automobile, a clean house or a mowed lawn - in other words, actual goods and services). The concentration of wealth exacerbates this because it encourages people who already have every material thing they could want and will spend no more in the general economy to keep stockpiling yet more in financial assets. Anxiety about a sluggish economy (and the fear that their perceived wealth is at risk, the loss of which would not change their actual lives) drives them to invest in "safe" assets e.g. treasuries and cash, driving down interest rates and driving up the prices of a declining supply of real assets e.g. real estate financed at low interest rates.
Good for them. Bad for everyone else.
So, correctly, comments have zeroed in on the tax advantage given to returns on capital over wages, notwithstanding that wages, by their nature, involve real and actual economic activity. Carried interest is simply a fiction created by clever accountants and lawyers to provide a narrow and privileged group of employees who need tax breaks least of all. It amplifies hoarding, and disadvantages working people at tax time, who, if they were not being so heavily taxed might actually spend more, generating ACTUAL demand for further ACTUAL goods and services.
Good for them. Bad for everyone else.
So, correctly, comments have zeroed in on the tax advantage given to returns on capital over wages, notwithstanding that wages, by their nature, involve real and actual economic activity. Carried interest is simply a fiction created by clever accountants and lawyers to provide a narrow and privileged group of employees who need tax breaks least of all. It amplifies hoarding, and disadvantages working people at tax time, who, if they were not being so heavily taxed might actually spend more, generating ACTUAL demand for further ACTUAL goods and services.
119
I must thank DI Shaw for digging deeper into the problem that was stated by Mr. Patricott. We all share in an innate selfishness that is mirrored in what our elected representatives create as the law of the land. As a 75 year old man who has a substantial percentage of perceived wealth hoarded away in broker's investment statements, I, too, wonder if I am being selfish. I believe that I should pay my fair share for the goods and services that I obtain. So when my governing bodies spend money to build schools, highways, pay teachers, police, military to give me service, then I should pay my fair share through taxes. I should not just borrow, through bonds whose debt eventually rests upon children, grandchildren, and great grandchildren. In this age of ever-better computing capacity, we should have brokers give an annual figure of anticipated capital gains (and losses) during a given calendar year, and have that gain (or loss) reported in adjusted gross income, and be taxed as regular income. Since there would be no required withholding tax payments on this anticipated gain, our April 15ths might be even more scarey than they presently can be, after a strong year on Wall Street. Nevertheless, as my Dad used to say, "After honestly preparing my tax returns, if I find that I have a higher tax bill than the "average" guy, then, I can be proud of the fact that I earned more and am wealthier than other people.
1
Name one thing that you own that was not produced with investment money.
I agree. One of the things that has exacerbated income inequality, is this competition among the rich to see who has the most or at least more money than the next. This kind of amassing of fortunes actually discourages the foundation of trickle down economics. If you are trying to increase your net worth to the max, making, and not spending money is the primary goal. Working people have no choice but to spend what they make to live, so the system is inherently biased to favor the wealthy and help them become even wealthier.
Meanwhile regular savings are at the point of providing almost no interest, the interest rates on credit are very high, further exacerbating the cycle of debt many people live in throughout their lives, and small investments such as individual retirement funds are constantly at the mercy of a volatile market, so people with little to lose are understandably terrified of ending up with nothing to support them in later years. And regular W-2 employees get the worst of it because they ultimately pay the most in taxes without the benefits of the many "loopholes" used by the rich and the deductions available to the self-employed and/or business owners.
Meanwhile regular savings are at the point of providing almost no interest, the interest rates on credit are very high, further exacerbating the cycle of debt many people live in throughout their lives, and small investments such as individual retirement funds are constantly at the mercy of a volatile market, so people with little to lose are understandably terrified of ending up with nothing to support them in later years. And regular W-2 employees get the worst of it because they ultimately pay the most in taxes without the benefits of the many "loopholes" used by the rich and the deductions available to the self-employed and/or business owners.
1
Carried carried interest is one example of changes needed to the tax code. There are several other changes. When the economy was not doing well a change was made to deprecation. Most investments in machinery and equipment are placed on a deprecation schedule and the yearly share of all items are are deducted from gross profits. To encourage purchases of machinery and equipment half of the cost was deducted from gross profits. This rule dramatically reduced income tax paid. This rule had a purpose but it is past time change it back. By making needed changes will increase income tax reiceived with out any increase in rates.
Thanks for stepping up to the plate to advise changing a "bad-signal" rule that, changed, would add $2 billion to the national coffers.
When even high power capital investors like you begin advocating this change, echoing many others for the past 8 years, it's more than time to get this done.
I don't think anything more can be said because you said it all:
"We should not be receiving a tax break meant for investors when our work does not involve the risk of our own investment of capital. As the former Treasury secretary Larry Summers once said of carried interest, “Rarely has a policy existed so long with such weak arguments in its favor.”"
Congress, over and out. And let this be the first of a major tax reform effort that does NOT rely on tax breaks for billionaires.
When even high power capital investors like you begin advocating this change, echoing many others for the past 8 years, it's more than time to get this done.
I don't think anything more can be said because you said it all:
"We should not be receiving a tax break meant for investors when our work does not involve the risk of our own investment of capital. As the former Treasury secretary Larry Summers once said of carried interest, “Rarely has a policy existed so long with such weak arguments in its favor.”"
Congress, over and out. And let this be the first of a major tax reform effort that does NOT rely on tax breaks for billionaires.
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Mr. Patricof is one lonely voice for tax fairness in a sea of self-serving justifications for unwarranted privilege - recall the hedge fund lobby's argument before congress a year or two back that they merit this tax break because, get this, of all the jobs they create - and he deserves to be applauded for his stance. However, he hardly goes far enough - the favored tax treatment of capital gains gives an unfair advantage to returns from capital versus earned income, and should be eliminated.
17
Until the motivations of people like Grover Norquist, the Koch brothers, Karl Rove and Rupert Murdoch are understood by the uninformed part of the population that continue to support them, nothing will change.
46
On these pages Tim Egan talks about the ignorance of Americans. It is even greater with matters of taxes and finance, where the willfully ignorant have bought the Republican mantras to protect the rich.
If there is a move to eliminate the carried interest loophole and eliminate capital gains special rates on investments with no real risk (dividends), the Republicans will scream as their puppeteers prompt them and the Trumpistas and their ilk will cry "soaking the rich!", "punishing the job creators", "destroying the American Dream", "giving away my money to the unworthy 47%" on cue.
I'm not holding my breath waiting for any meaningful change.
If there is a move to eliminate the carried interest loophole and eliminate capital gains special rates on investments with no real risk (dividends), the Republicans will scream as their puppeteers prompt them and the Trumpistas and their ilk will cry "soaking the rich!", "punishing the job creators", "destroying the American Dream", "giving away my money to the unworthy 47%" on cue.
I'm not holding my breath waiting for any meaningful change.
1
This is one of the most absurd and indefensible tax loopholes. I'm not sure if it is a major contributor to today's income maldistribution but it is certainly an illustration of it. Tax income that can only be earned with the advantage of being obscenely rich. Ugh. Needs to stop
8
It is a shame that in a democracy it might take the concerted effort of someone in high finance to close such an indefensible giveaway. Bravo to Mr. Patricof (and I truly mean that) but a functioning democracy shouldn't need his help.
17
This is not a functioning democracy. Like peole in other cointries run by a privilged few, we are allowed to vote to maintan the fiction that we are self-governing, but it is just a fiction to keep the masses from revolting. Watch what has been done to acheive voter suppression and tell me we have "fair and free" elections.
Carried interest is an institutionalized cheat. It is symbolic of the iron grip of the .01% on both government and the economy. The first leader to do away with this canker will be hailed as a hero. Better the oligarchs realize this and do it first in advance of the torches and pitchforks.
48
It seems the only people who support such tax reform are people who are not rich and people who are so rich, that they can finally comfortably say that "yes I have been getting an unbelievably good deal and I feel a little guilty about it" Meanwhile Wall Street is pumping politicians coffers full to keep this sweet deal around a little longer.
10
Well said. But capitol gains should also be taxed as ordinary income. The idea that we need to give tax breaks to the wealthy to encourage investment in the market is ludicrous. Trickle down economics doesn't work. What investor is walking away from a good investment due to tax obligations and why is it the taxpayers obligation to subsidize their risk? Income is income.
416
Capital gains affects everyone with savings outside of dedicated retirement vehicles (401k, IRA, etc) and all state/teacher/police pensions, etc. Carried interest affects only hedge fund managers. Be careful what you wish for -- people already do not save enough for retirement. Look at the uproar when President Obama tried to take away 529s -- while many middle-income people with kids do not yet use it, a lot can envision a time when they will. Everyone still believes that next year, they will save enough to invest for retirement, and would not want gains to be taxed as income. Pension funds currently rely on the rates as they are, or teachers and government employees would have to contribute a large share of their current income. Get rid of capital gains favorability is like saying let's all be poor on social security together as seniors. The amount gained will not be nearly as much as calculated, because the change in tax code will change investor behavior. Social security payouts may go up, but it will never fund a middle class retirement for everyone. So again, we will all be poor (with a living wage income) together. Yay!
2
> Trickle down economics doesn't work.
Buy a car from a bum instead of a multi-billion dollar car company. We continue to benefit from Carnegie, Vanderbuilt and Rockefeller, not the Social Gospel.
Buy a car from a bum instead of a multi-billion dollar car company. We continue to benefit from Carnegie, Vanderbuilt and Rockefeller, not the Social Gospel.
1
I would add that maybe some form of smoothed mark to market should be used to ensure everyone actually pays taxes or at least eliminate the ability to give away pre-tax assets.
Yes, thank you, eliminate the carried interest advantage. It's not just a "toxic belief" in the unfairnesses in our country today, it's a toxic fact.
"...86 percent of Americans agreed that members of Congress paid too much attention to what their major financial contributors wanted them to do." is akin to saying 86 percent of Americans believe in gravity.
"...86 percent of Americans agreed that members of Congress paid too much attention to what their major financial contributors wanted them to do." is akin to saying 86 percent of Americans believe in gravity.
8
Nicely said, but also totally ridiculous, unfortunately. For every Warren Buffet version of the ultra-wealthy there is a thousand who will oppose any policy that might cost them a cent, and they will use their wealth to make sure their view prevails. No Mr. Patricof, forget about patriotism, I am afraid that it will take a bit of a battering ram, in this case in the form of another Clinton presidency, to do away with this tax break. (And yes, as this takes place the wealthy will shriek like stuck banshees.)
50
Thank you for courageously suggesting that Congress close the carried interest loophole. That will be an important step in the right direction.
It's too bad that I'm reading your op-ed and not an op-ed authored by Paul Ryan and Charles Schumer.
When 86% of Americans agree that "that members of Congress [pay] too much attention to what their major financial contributors [want] them to do", the members of Congress are not just failing to conceal their actions. They are openly taunting voters.
It's not just Congress's harshest ctitics who “feel more strongly about the undue influence that donors and lobbyists have on Congress than they do about any other major criticism of the institution”. It's your average voter.
It's too bad that I'm reading your op-ed and not an op-ed authored by Paul Ryan and Charles Schumer.
When 86% of Americans agree that "that members of Congress [pay] too much attention to what their major financial contributors [want] them to do", the members of Congress are not just failing to conceal their actions. They are openly taunting voters.
It's not just Congress's harshest ctitics who “feel more strongly about the undue influence that donors and lobbyists have on Congress than they do about any other major criticism of the institution”. It's your average voter.
34
Your intentions are good, but those of many of your peers are apparently not, otherwise why would this loophole still exist? Clearly politicians are being lobbied to maintain the status quo. This is not a matter of being realistic, and seriously, when did most venture capitalists ever hold "fairness" and "patriotism" as high priorities? No, this is pure and simple a matter of greed and avarice on the part of people whose essence is all about accumulating more wealth for themselves. The only way to stop them is to stop them. They won't stop themselves.
12
Obama says he'll be a venture capitalist after he leaves office. Ask him what he wants then re his carried interest. Or maybe he'll simply be renting himself to a v.c. fund for a large annual fee, not entirely unlike the way Trump rents his name to real estate projects.
6
I'd suggest Mr. Patricof be very careful about drinking the water the next time he lunches with his peers.
The carried interest loophole is perhaps the prime example of the influence of money on lawmakers. The arguments for it are less than weak, I'm amazed members of Congress can make them with a straight face.
The carried interest loophole is perhaps the prime example of the influence of money on lawmakers. The arguments for it are less than weak, I'm amazed members of Congress can make them with a straight face.
63
the only fair tax (if taxes can ever be fair is a flat tax with no exemptions for anything.
2
Why on earth would anyone think this?
The best tax is a graduated income tax, sufficiently graduated to compensate for capitalisms tendency to move income to the rich.
The best tax is a graduated income tax, sufficiently graduated to compensate for capitalisms tendency to move income to the rich.
9
This "profile in courage" has waited way too long to complain. There are other tax advantages he and others have thrived upon, since Reagan told us that money was good for the rich, but bad for poor.
Spare me the phony apostasy.
Spare me the phony apostasy.
18
The top marginal tax rate is 39 percent in the US and 55 percent in Sweden. There's lots of taxes we can raise and loopholes we can close to provide more government services.
48
Also note the maximum bracket (56%) applies much earlier in Sweden, i.e. applies to far lower income levels and thus to a far greater percentage of tax payers.
The 39% bracket in the US applies only to taxable income over $415K ($467k for joint filers) - basically only to the top 1 or 2% of taxpayers, while in Sweden the max bracket (56%) applies to income over approx $88k.
Swedes get a lot of benefits - health care, higher education, child care - but they pay vastly more tax than Americans. I think you would have an enormous revolt if you told American households with incomes over $90k that they had to pay a 56% marginal tax rate.
The 39% bracket in the US applies only to taxable income over $415K ($467k for joint filers) - basically only to the top 1 or 2% of taxpayers, while in Sweden the max bracket (56%) applies to income over approx $88k.
Swedes get a lot of benefits - health care, higher education, child care - but they pay vastly more tax than Americans. I think you would have an enormous revolt if you told American households with incomes over $90k that they had to pay a 56% marginal tax rate.
2
Inaccurate comparison as you forget to include state (and city) taxes in the US which I do not believe exist in Sweden...
> more government services.
Theft from the most productive.
Theft from the most productive.
Maybe the govt. can start by gutting useless agencies and firing bureaucrats that have enacted regulations that have lost many Americans their jobs and driven them overseas. Maybe we can get back to a Constitutional govt. one that supports business instead of demonizes it. Maybe just maybe we can support our Veterans more than illegals. Many Capitalists have no problem paying taxes, the problem lies with a bloated, wasteful, govt, that has many politicians that could never hold down a job let alone run a business. It's not contracting anytime soon, tax investment at ordinary income, great idea? I'm sure that would do wonders for start ups and Venture capital. Who thinks of these things? Oh, billionaires who have already made their money and have political aspirations, or just like going to White House parties.
6
Another "hate the government " diatribe. For those who have such disdain for any government involvement in our society, just go all the way. Advocate taking down stop signs at intersections; do away with government funded police, fire departments, and publicly funded highways and other infrastructure. All those bureaucrats who are employed by the FAA, the state highway departments, the Army Corps of engineers are part and parcel of the "bloated, wasteful gov't" that are enabled by "politicians that could never hold down a job let alone run a business." I'm sure that the philosophy of the interests of "business" being supreme could easily be defined with 4 declarations:
1. profits can never be high enough
2. taxes can never be low enough
3. regulations can never be few enough
4. wages can never be low enough
Oh, there's one more - #5 - government can never be small enough
1. profits can never be high enough
2. taxes can never be low enough
3. regulations can never be few enough
4. wages can never be low enough
Oh, there's one more - #5 - government can never be small enough
13
Love this idea of a "bloated" government, having much recent contact with it as I pursue a job requiring extensive regulatory licensing. Every single application sent to a department using government employees was handled nearly instantly, accurately, and effectively; literally sent, acted on, accomplished. The one application whose work was outsourced? Weeks later, still waiting.
The conservative idea that business can do it better and that government is incompetent is malarkey.
The conservative idea that business can do it better and that government is incompetent is malarkey.
18
Please provide the sources for your rant. It does not appear to be based in fact. The government is not bloated - except for the Department of Defense, which certainly is. Most of the government s so starved for support that it can barely provide the services required. The IRS stretched to the breaking point, for example. The game plan from Congress is to close so many Social Security offices that the public will become frustrated and blame the agency for being ineffectient when in fact it is being set up to fail - just like the Postal Service.
No, government is not bloated. It is starving. The only functions that are untouched are those that serve corporate greed: the military, the police, and prisons. Want to cut waste? Start with privatized functions that alwas cost more and function without accountability and the obscenely wasteful wars we can always seem able to afford. Then tackle the tax loopholes and incentives to offshore both jobs and cash.
No, government is not bloated. It is starving. The only functions that are untouched are those that serve corporate greed: the military, the police, and prisons. Want to cut waste? Start with privatized functions that alwas cost more and function without accountability and the obscenely wasteful wars we can always seem able to afford. Then tackle the tax loopholes and incentives to offshore both jobs and cash.
15
Of course, taxing all stock transactions is also a logical and compelling policy. Sell or buy $1million of stock? Pay a transaction tax of 0.5% ($5,000) -- half of one percent. That's a nickel, people, and would generate a couple hundred billion dollars annually. Too much? Make it two and a half cents.
93
> We should reward real work and encourage it rather than market dabbling.
Investment is the basic economic cause of the radical and radically increasing productivity of the last 300 years. The more investment, the more production, the more life. But for Pragmatist animals, there is only this concrete moment here and now, with no memory and no planning. Even a hunting-gathering culture invests some valuable time in making hunting tools. Man's independent mind, not fascist bureaucrats, is the source of production.
Investment is the basic economic cause of the radical and radically increasing productivity of the last 300 years. The more investment, the more production, the more life. But for Pragmatist animals, there is only this concrete moment here and now, with no memory and no planning. Even a hunting-gathering culture invests some valuable time in making hunting tools. Man's independent mind, not fascist bureaucrats, is the source of production.
George, actually 0.5% is even less. It is one tenth of a nickel.
Won't raise much money. Even at .25% 99% of all trading would disappear. Sorry.
Good critique of the tax dodge known as carried interest.
Now, let's examine the stated rationale for lower tax rates for capital gains!!
It will quickly fall apart. Encouraging *riskier* investment or, rather, what is often merely stock speculation, is NOT a good thing.
The rationales is really little more than self-serving claptrap for the investment banker and 1%!
We should reward real work and encourage it rather than market dabbling. Most who reap HUGE windfalls from capital gains are profiting passively off the system -- paper gains, achieved while they sleep, should NOT be taxed at lower rates than honest work-- in the factory, on the job site, at the school, or in the hospital.
Those who gain the most from capital gains are already well off or much better off.
A slow phase out of capital gains could generate billions that could be used to rebuild the country, provide full employment, and, over time, in times of expansion, reduce the deficit.
Now, let's examine the stated rationale for lower tax rates for capital gains!!
It will quickly fall apart. Encouraging *riskier* investment or, rather, what is often merely stock speculation, is NOT a good thing.
The rationales is really little more than self-serving claptrap for the investment banker and 1%!
We should reward real work and encourage it rather than market dabbling. Most who reap HUGE windfalls from capital gains are profiting passively off the system -- paper gains, achieved while they sleep, should NOT be taxed at lower rates than honest work-- in the factory, on the job site, at the school, or in the hospital.
Those who gain the most from capital gains are already well off or much better off.
A slow phase out of capital gains could generate billions that could be used to rebuild the country, provide full employment, and, over time, in times of expansion, reduce the deficit.
98
Stephanie, you are right about the carried interest rate for "riskier" investments. Does carried interest apply to a person putting his/her money down at a Los Vegas crap table?
1
No taxation without representation? I pay taxes. No loopholes whatsoever. I work three jobs, one as an employee of a socially beneficial non-profit where I make lousy money. It's all taxed. Student loans and bank fees for not having a "savings account." Everybody makes money off of me. I generate profits at the big banks and for real estate Dicks. Am I represented in our democracy? Heavens no! Who are we kidding.
Boy or buy would I like to see TRUMP's tax returns.
Boy or buy would I like to see TRUMP's tax returns.
2
Close, but no cigar. Your last paragraph should read:
"A slow phase out of capital gains could generate billions that could be used to increase military spending, spread democracy around the globe, increase America's support of Dictators, Despots and Corrupt regimes, and over time, increase congress' salaries, pensions, and hiring of good looking chicks as assistants, while doing absolutely nothing for the deficit."
"A slow phase out of capital gains could generate billions that could be used to increase military spending, spread democracy around the globe, increase America's support of Dictators, Despots and Corrupt regimes, and over time, increase congress' salaries, pensions, and hiring of good looking chicks as assistants, while doing absolutely nothing for the deficit."
1
The excess and unfairness and income inequality in this country is so bad that wealthy people of conscious like Mr. Patricof - who suggests this first step - and Mr. Buffet and friends pledging billions of what they refer to as their "personal" fortunes", are recognizing the obscenity of it.
People insist on saying that because some people are rich does not make others poor, but a snapshot of time, with a finite amount of wealth, shows that the more held by the top 1% means the less to be shared by the bottom 99% and with everyone all the way down fighting for as much as they can get, guess how much is left for the bottom 1%.
A country that can support obscene wealth at the top can afford to make sure that people who put in a 40 hour week make enough money to live in dignity in their communities - and to dream of a future for themselves and their families.
And that same country can afford to make sure that those people who hurt, physically and mentally, who are not capable of being trained as IT techs, who in a past world could have worked on cars, or worked on a factory line, or taken in kids to watch, or punched a cash register - all jobs either on their way out or requiring licensing and/or tech training now, have something useful to do and a wage to earn or financial assistance.
We do have to "change". But not into the hateful, racist, isolationist, blaming culture Trump would "change" us to. Now, more than ever, we need to kind, innovative, and cooperative.
People insist on saying that because some people are rich does not make others poor, but a snapshot of time, with a finite amount of wealth, shows that the more held by the top 1% means the less to be shared by the bottom 99% and with everyone all the way down fighting for as much as they can get, guess how much is left for the bottom 1%.
A country that can support obscene wealth at the top can afford to make sure that people who put in a 40 hour week make enough money to live in dignity in their communities - and to dream of a future for themselves and their families.
And that same country can afford to make sure that those people who hurt, physically and mentally, who are not capable of being trained as IT techs, who in a past world could have worked on cars, or worked on a factory line, or taken in kids to watch, or punched a cash register - all jobs either on their way out or requiring licensing and/or tech training now, have something useful to do and a wage to earn or financial assistance.
We do have to "change". But not into the hateful, racist, isolationist, blaming culture Trump would "change" us to. Now, more than ever, we need to kind, innovative, and cooperative.
380
> a snapshot of time, with a finite amount of wealth
Notice the Pragmatist philosophy of animalism. Man's life requires planning for the future. Man is not an animal, killing other animals for a finite amount of wealth. Man produces wealth and the longer the planning ,the more wealth. Our scientific-industrial-capitalist prosperity is being deliberately destroyed by modernist/nihilists who hate man's independent mind. They have reduced themselves intellectually to the sub-human consciousness of "be-here-now animals. They are intellectual anti-intellectuals. They will destroy everything to evade man's basic moral responsibility to focus his mind, thru his senses, onto the concrete material universe. Man's mind is his basic method of survival.
Notice the Pragmatist philosophy of animalism. Man's life requires planning for the future. Man is not an animal, killing other animals for a finite amount of wealth. Man produces wealth and the longer the planning ,the more wealth. Our scientific-industrial-capitalist prosperity is being deliberately destroyed by modernist/nihilists who hate man's independent mind. They have reduced themselves intellectually to the sub-human consciousness of "be-here-now animals. They are intellectual anti-intellectuals. They will destroy everything to evade man's basic moral responsibility to focus his mind, thru his senses, onto the concrete material universe. Man's mind is his basic method of survival.
Not one word you have pontificated changes or refutes or affects one word I wrote. Those of us of "sub human consciousness" are forced to spend our lives in the "be here now" as in be here at work, be here to pay your bills, be here to get house house repo's, be here to buy food, be here to get medical care. For many of us, we do have the luxury in basking in our minds - our "basic method of survival" is food, and clean non-toxic water, and shelter and medical care - all of which takes what in the "be-here-now" world? Money.
Nonetheless, you can bet that whichever way the November election goes the carried interest loophole will prevail. Despite the rhetoric dished out on the stump, both candidates represent considerable wealth combined with strong ties to Wall Street.
Although I am conservative on most economic issues, Mr. Patricoff is correct. There is no justification for taxing carried interest at capital gains rates. By the way, Mr. Patricoff (and this is true for all liberal tax and spend politicians as well) you don't have to wait for a change in the tax code. Anyone can pay more taxes than they legally owe.
33
As Mr. Patricof says, the real issue is fairness, and a few liberals voluntarily paying more than they legally owe doesn't address either the issue of fairness or the impact of the unfair tax code on the Federal budget (since few wealthy taxpayers will ever choose to). Only changes to the tax code will make a real difference.
7
He cites "liberal tax and spend politicians." Apparently, he supports "conservative spend but don't tax, creating a huge deficit, politicians."
1
"Anyone can pay more taxes than they legally owe."
The problem in this and so many other similar cases is, unfortunately, that this tax loophole is not "illegal".
The problem in this and so many other similar cases is, unfortunately, that this tax loophole is not "illegal".
1
I agree that we need wholesale change of the tax code, including changing the treatment of carried interest. I assume that Mr. Patricof has his accountant calculate what he would have paid had the loophole been closed and voluntarily sent the amount to the government.
25
With all due respect John, I doubt that Mr. Patricof or any tax increase politician pays more than is required.
Ah, the predictable right wing trope.
The reality is that a few people willingly paying more taxes will mean nothing toward the greater good.
The reality is that a few people willingly paying more taxes will mean nothing toward the greater good.
I am not talking about the impact on the economy. I am talking about hypocrisy of those who want to raise taxes.
What a novel idea that people who move money around for a living, and get incredibly rich in the process, should pay at least the same as the rest of us whose sweat equity, toil and tears earn a fraction as much.
I'm guessing that Mr. Patricof will be vilified by his own, as it's hard to imagine very many of his fellow investors being so altruistic. No, so patriotic and fair-minded, as to admit openly that they are getting away with cheating the rest of society by not paying their fair share.
The blame however, rest squarely on lawmakers who allow this to continue, as they shamelessly favor their big donor corporate masters over their constituents.
I'm guessing that Mr. Patricof will be vilified by his own, as it's hard to imagine very many of his fellow investors being so altruistic. No, so patriotic and fair-minded, as to admit openly that they are getting away with cheating the rest of society by not paying their fair share.
The blame however, rest squarely on lawmakers who allow this to continue, as they shamelessly favor their big donor corporate masters over their constituents.
293
Peter K - "The blame however, rest squarely on lawmakers who allow this to continue, as they shamelessly favor their big donor corporate masters over their constituents."
Much more of the blame rests on the electorate who continually vote back into office these "lawmakers" fully aware that they are in it solely for their own benefit. At this point in our nation's history we the people should know that "it's their nature" and rid ourselves of them.
Much more of the blame rests on the electorate who continually vote back into office these "lawmakers" fully aware that they are in it solely for their own benefit. At this point in our nation's history we the people should know that "it's their nature" and rid ourselves of them.
1
The rest of the developed world refers to this as corruption. Just follow the money to our political leaders and then vote them out of office.
I think we the voters are just as much the blame as our representatives who act on behalf of the wealthy while distracting us with social hot button issues. We need to pay more attention to who and how representative vote on legislation. Then we must punish those who abuse their elective office to favor their campaign donors and friends at the expense of what is good for constituents and the nation.
"my fellow venture capitalists and private equity investors should support the closing of the carried interest loophole: It would carry great symbolic weight"
I regretfully disagree. Even some old white guys like me see very little symbolism in recognizing a wrong that has been pushed, prodded and protected by its privileged beneficiaries for half a century.
In 1955 the top marginal tax rate was 91%. In 2016 it is 39.6%, and the Effective Individual Income Tax Rate for those making $1.5 million or more is 20.1%.
When you are among those who benefit most from doing business in the United States, due to our laws, our infrastructure, our society and our belief in capitalism, you should also be the ones who contribute the most.
It really isn't complicated.
I regretfully disagree. Even some old white guys like me see very little symbolism in recognizing a wrong that has been pushed, prodded and protected by its privileged beneficiaries for half a century.
In 1955 the top marginal tax rate was 91%. In 2016 it is 39.6%, and the Effective Individual Income Tax Rate for those making $1.5 million or more is 20.1%.
When you are among those who benefit most from doing business in the United States, due to our laws, our infrastructure, our society and our belief in capitalism, you should also be the ones who contribute the most.
It really isn't complicated.
4
And in 1955 the lowest tax bracket took 20%, starting at $2000 ($18,000 in today's dollars), compared to 2015 rates of 10%, starting at $9000 (but with more generous deductions and exemptions).
Yep, not so complicated--everyone paid in more, and more people contributed to the tax budget.
Yep, not so complicated--everyone paid in more, and more people contributed to the tax budget.
Well, one can repair quite a bit of roads and bridges for $2 billion. Or to provide free insulin to those who cannot afford it, because it is a matter of life and death. Or to ensure quite a bit of kids. There could be some other ideas how to spend $2 billion. If I'm asked, I could have spent some time to think about it.
So, I suggest we immediately respect the request of Mr.Patricof and patch this loophole with high quality cement.
I would say that the request of Mr. Patricof should be
So, I suggest we immediately respect the request of Mr.Patricof and patch this loophole with high quality cement.
I would say that the request of Mr. Patricof should be
2
Congratulations on this strong stance for tax fairness. The argument is very powerful by virtue of being absolutely self-evident.
There is no more obscene inequality in front of the law than this special class of American worker that gets to pay half of its "fair share" of taxes, benefiting in effect from a $2 billion perpetual annual subsidy, courtesy the rest of us.
These fat cats are the same people, mind you, who, while gorging on this regulatory subsidy at your and my expense, will, without any sense of irony, complain about regulatory excess.
This situation is even more grotesque if one takes into account the fact that the beneficiaries of this inequality, fund managers and venture capitalists et al, as a class, are among the highest paid workers in the country.
There is no more obscene inequality in front of the law than this special class of American worker that gets to pay half of its "fair share" of taxes, benefiting in effect from a $2 billion perpetual annual subsidy, courtesy the rest of us.
These fat cats are the same people, mind you, who, while gorging on this regulatory subsidy at your and my expense, will, without any sense of irony, complain about regulatory excess.
This situation is even more grotesque if one takes into account the fact that the beneficiaries of this inequality, fund managers and venture capitalists et al, as a class, are among the highest paid workers in the country.
8
Mr. Patricof writes, "Our current political and cultural environment is marred by a toxic belief that the country’s economic order is rigged against ordinary Americans." Toxic belief my eye! It's the plain and simple truth: Economics professor Justin Wolfers wrote that "the average income for the richest 1 percent of Americans, excluding capital gains, rose from $871,100 in 2009 to $968,000 from 2012-13. The 99 percent...experienced a drop in average incomes from $44,000 to $43,900."
As Mr. Patricof notes, the carried interest loophole costs the American people $2 billion in tax receipts every year. Though a very small part of the national budget, closing it would carry "great symbolic weight." I suppose he imagines that we of the 99% will be duly grateful. But we want more than symbolism. A recent census report shows that half the U.S. population lives in poverty or is low income. Tossing us a few shekels while hoarding the vast majority of the wealth just doesn't cut it.
As Mr. Patricof notes, the carried interest loophole costs the American people $2 billion in tax receipts every year. Though a very small part of the national budget, closing it would carry "great symbolic weight." I suppose he imagines that we of the 99% will be duly grateful. But we want more than symbolism. A recent census report shows that half the U.S. population lives in poverty or is low income. Tossing us a few shekels while hoarding the vast majority of the wealth just doesn't cut it.
5
Mr. Patricof is right. In the interest of maximizing growth, the trickle down theory demands that we keep all investment related tax low. Carried interest is one small portion. Our historically low top bracket income tax rate and historically low capital gain tax are the main factors contributing to income inequality in our society today. These rates should go up. GOP called for abolishing estate tax. This should never be allowed as it creates family dynasties and effective creating an aristocracy in American society. Reversing these tax policies, we will have dismantled most of the perverse effects of trickle down economy. What about growth? If you look at GDP growth rate per capita, there is no difference before or after the Regan presidency. These policies have almost negligible effect on the growth rate of our economy but only on the distribution of wealth in this country.
1
This is an appreciated admission from someone who feels he has more than enough money and is realistic about our current economic inequality. But let's go much further. Just eliminate the entire tax difference between income from capital gains/dividends/interest and ordinary income. Tax preferences in general are barely justifiable for either economic or moral purposes. Giving people incentives to do things this way and not that often perverts the playing field in unexpected, unfair and negative ways.
Investors will still invest because there are too many other reasons, beyond tax advantages, to do so. If you want to start a business, or invest in a business because you believe it will be successful, you are not going to not do it just because the income will be treated (finally) as income.
Believe me, I'm not wealthy (at all) but on my own micro-scale of investments, I see the difference in tax treatment and cannot justify it. I have all the usual suspects: 401K, Roth IRA, direct stock and government bond ownership, etc., etc., and salaried/pension income. Any returns I get from them are ultimately spent the same way. Although I could, I don't spend money from one only on rent, and the other only on food, and another only on subway fare. It's just income that I can allocate to any expense. If I do well (or the stock market is full of irrational exuberance) one year in my investments, I get greater returns. If the market is irrationally glum, I just deal with it.
Investors will still invest because there are too many other reasons, beyond tax advantages, to do so. If you want to start a business, or invest in a business because you believe it will be successful, you are not going to not do it just because the income will be treated (finally) as income.
Believe me, I'm not wealthy (at all) but on my own micro-scale of investments, I see the difference in tax treatment and cannot justify it. I have all the usual suspects: 401K, Roth IRA, direct stock and government bond ownership, etc., etc., and salaried/pension income. Any returns I get from them are ultimately spent the same way. Although I could, I don't spend money from one only on rent, and the other only on food, and another only on subway fare. It's just income that I can allocate to any expense. If I do well (or the stock market is full of irrational exuberance) one year in my investments, I get greater returns. If the market is irrationally glum, I just deal with it.
2
This is a very nice sentiment, and I think the author's idea should be supported. However, as he himself recognizes, it is a symbolic drop in the bucket. The real problem is systemic, and will require systemic solutions. The political economy needs to be restructured to stop funnelling money to the top 1%, and back to funnelling it to the middle class. As we used to say back in the Cold War, a strong middle class is the foundation of a strong democracy, and we backed those words with policies tha redistributed wealth downward via taxes to broad social programs. For the past generation we haven't even paid lip service to this, and if we don't soon walk the walk as well as talk the talk, the system is going to come crashing down. Liberalism is enlightened self interest.
5
If all income were treated the same and all loopholes eliminated, we could start having a reasonable tax code instead of a wall full of volumes that nobody understands completely. That won't happen anytime soon, but carried interest would seem to be a good place to start. In some European countries charges for social programs apply to all revenue, which allows for a wider protection for everybody.
2
America needs more people like Mr Patricof to raise their voices and most importantly, act in similar vein by no longer lobbying and pushing politicians to retain or not consider changes to the retained interest loophole.
Whilst there is no shortage of very selfish, greedy and opportunistic wealthy Americans who are very easy to despise (and pity) for their behaviour, the majority of people who are gaming the system and taking advantage of loopholes and all the other cracks and loose floorboards so to speak, they are just the same as you and I who would also take advantage of opportunity and the ways and wherefores, because that's how humans react and behave.
Just like the Husband or Wife that "try it on" to get something/do something they want and to get it will employ whatever way thought most likely to work in getting it, these are just normal behaviours we all have.
However, the above is not relevant in regards to anything that causes others harm, hurt or hardship and for those things anyone who exploits them for their own advantage is morally deficient and should be called out.
But with every type or kind of action and behaviour there is supposed to be a guideline and custodial responsibility and expectation that those we elect to best provide those things and write rules , laws and provide effective enforcement to ensure that as many , most or even every citizen is considered and their best interests the first priority.
The failure lies with the Politicians.
Whilst there is no shortage of very selfish, greedy and opportunistic wealthy Americans who are very easy to despise (and pity) for their behaviour, the majority of people who are gaming the system and taking advantage of loopholes and all the other cracks and loose floorboards so to speak, they are just the same as you and I who would also take advantage of opportunity and the ways and wherefores, because that's how humans react and behave.
Just like the Husband or Wife that "try it on" to get something/do something they want and to get it will employ whatever way thought most likely to work in getting it, these are just normal behaviours we all have.
However, the above is not relevant in regards to anything that causes others harm, hurt or hardship and for those things anyone who exploits them for their own advantage is morally deficient and should be called out.
But with every type or kind of action and behaviour there is supposed to be a guideline and custodial responsibility and expectation that those we elect to best provide those things and write rules , laws and provide effective enforcement to ensure that as many , most or even every citizen is considered and their best interests the first priority.
The failure lies with the Politicians.
1
Do Op-Ed pieces make it past the eyes of an editor? If so, how did this paragraph:
"The general partner is managing the funds of others and rarely puts his own money into the initial investment. The risk he takes is that his ultimate payout is not guaranteed unless the venture is profitable — which is very different from the investor who is putting his own money at stake."
not become this:
"General partners manage the funds of others and rarely put their own money into the initial investment. The risk they take is that the ultimate payout is not guaranteed unless the venture is profitable — which is very different from those investors who are putting their own money at stake."
"The general partner is managing the funds of others and rarely puts his own money into the initial investment. The risk he takes is that his ultimate payout is not guaranteed unless the venture is profitable — which is very different from the investor who is putting his own money at stake."
not become this:
"General partners manage the funds of others and rarely put their own money into the initial investment. The risk they take is that the ultimate payout is not guaranteed unless the venture is profitable — which is very different from those investors who are putting their own money at stake."
3
Alan, nothing prevents you from donating the difference between what you regard as a fair tax and the actual tax you are paying. You are bound to spend your money to help the public more efficiently than the feds do.
Personally, I do not oppose high income tax rates and have lived for a while in European countries which combine high tax rates with excellent social services.
But both liberals and conservatives are wasteful.
For instance the US spent $492 billion on Medicaid in 2015. And yet there are people who are hungry. Shouldn't food take priority over expenditures on our inefficient health care system?
Or, the state of New York spent $54 billion in 2015 on Medicaid. But it spent only one billion on the City University of New York. Should education really be so unimportant?
When politicians are spending our money, two factors enter.
One is the fact that they will spend OUR money where it will get them the most votes (or campaign donations).
And second is the inherent inefficiency when many people with different interests make joint decisions.
The Nobelist Amartya Sen considers the thought that a camel is a horse constructed by a committee. But he rejects this thought as being too unkind to a camel which is quite efficient at living in the desert.
I do not have any answers. I am just wondering if "everything would be fine if only for these nasty Republicans" is more a fantasy than fact.
Personally, I do not oppose high income tax rates and have lived for a while in European countries which combine high tax rates with excellent social services.
But both liberals and conservatives are wasteful.
For instance the US spent $492 billion on Medicaid in 2015. And yet there are people who are hungry. Shouldn't food take priority over expenditures on our inefficient health care system?
Or, the state of New York spent $54 billion in 2015 on Medicaid. But it spent only one billion on the City University of New York. Should education really be so unimportant?
When politicians are spending our money, two factors enter.
One is the fact that they will spend OUR money where it will get them the most votes (or campaign donations).
And second is the inherent inefficiency when many people with different interests make joint decisions.
The Nobelist Amartya Sen considers the thought that a camel is a horse constructed by a committee. But he rejects this thought as being too unkind to a camel which is quite efficient at living in the desert.
I do not have any answers. I am just wondering if "everything would be fine if only for these nasty Republicans" is more a fantasy than fact.
1
Alan, I applaud you on your honesty and sheer patriotism.
It's about time our politicians pay attention to your plea of closing the tax loopholes of all the venture capitalists by taxing the carried interests.
It's true that our country needs professionals who'll manage our money diligently. But definitely not at a cost to the taxpayers.
$ 2 billion is a lot for our treasury if we tax the carried interest rates or the fees that people like you charge to your customers for managing their money.
Now, it's time for Congress to act diligently and take appropriate measures to end this loophole and not being influenced by our 'special interest' groups who don't care for the ordinary Americans.
The donors and lobbyists that have a very undue influence on Congress have to stop manipulating the minds of our political leaders through 'influence peddling' and let the 'Congress be Congress' and use the Government to take care of the 86% of the people who strongly believe that 'members of Congress paid too much attention to what their major financial contributors wanted them to do. The cynicism that is fraying our Democracy', as mentioned by you in this article.
It's true that donors and lobbyists are controlling our Congress.
Our politicians who are elected by the people should work for the same people's interests and definitely not for 1% of our elites just because these elites stuff their pockets with millions of dollars.
All politicians should realize that America is not for SALE.
It's about time our politicians pay attention to your plea of closing the tax loopholes of all the venture capitalists by taxing the carried interests.
It's true that our country needs professionals who'll manage our money diligently. But definitely not at a cost to the taxpayers.
$ 2 billion is a lot for our treasury if we tax the carried interest rates or the fees that people like you charge to your customers for managing their money.
Now, it's time for Congress to act diligently and take appropriate measures to end this loophole and not being influenced by our 'special interest' groups who don't care for the ordinary Americans.
The donors and lobbyists that have a very undue influence on Congress have to stop manipulating the minds of our political leaders through 'influence peddling' and let the 'Congress be Congress' and use the Government to take care of the 86% of the people who strongly believe that 'members of Congress paid too much attention to what their major financial contributors wanted them to do. The cynicism that is fraying our Democracy', as mentioned by you in this article.
It's true that donors and lobbyists are controlling our Congress.
Our politicians who are elected by the people should work for the same people's interests and definitely not for 1% of our elites just because these elites stuff their pockets with millions of dollars.
All politicians should realize that America is not for SALE.
1
Young investment bankers will be squirming after reading this story (tax argument). These young wiz kids already feel that the finance industry of old passed them by and the trend is to make them work for an hourly wage instead of bonus driven world. However, the real problems are that new enterprise development is in the dark ages secondary to capital and venture investing. Venture Capital basically says to new, emerging companies that we value you based on our failure rates instead of intellegent due diligence. Essentially, we fail nine time out of ten time and therefore we discount your efforts accordingly. Therein the number of new American companies are down including patents application and new listing. Taxing Wall Street will do little to improve new enterprise development as long as there are no new efforts to better fund emerging inventors (outside of the app world).
Our deficit climbs because we don't collect enough in taxes to Pay our obligations. 30 years of tax breaks for the wealthy have only helped the wealthy and expanded inequality
We have a revenue problem and the most sensible action is to tax capital gains, carried interest and dividends as ordinary income.
While we are at it we should eliminate the AMT and cap all deductions including charitable ones at 30% of income
Income is income
We have a revenue problem and the most sensible action is to tax capital gains, carried interest and dividends as ordinary income.
While we are at it we should eliminate the AMT and cap all deductions including charitable ones at 30% of income
Income is income
2
Eliminating the carried-interest provision in the tax code would be a great start to a much needed tax reform effort. ( Especially when compared to ridiculous proposals that claim that a reduction in the number of tax brackets would be a simplification of our bloated tax code. )
An even fairer proposal would be to tax ALL income at the same tax rate. Why should those who prefer the safety of an FDIC insured savings account that pays 1% interest pay a much higher ordinary income tax when investors in stocks that receive 9% income on average pay substantially less tax? As both a saver and investor, I know that I would still maintain a large portion of my net worth in stocks simply because it pays more. Let capitalism work and let market forces drive investment in businesses and stop supporting the very wealthy with a huge tax break. Don't worry, the very rich won't trade their high investment return for the return they would get on a savings account. It is the fair thing to do.
An even fairer proposal would be to tax ALL income at the same tax rate. Why should those who prefer the safety of an FDIC insured savings account that pays 1% interest pay a much higher ordinary income tax when investors in stocks that receive 9% income on average pay substantially less tax? As both a saver and investor, I know that I would still maintain a large portion of my net worth in stocks simply because it pays more. Let capitalism work and let market forces drive investment in businesses and stop supporting the very wealthy with a huge tax break. Don't worry, the very rich won't trade their high investment return for the return they would get on a savings account. It is the fair thing to do.
4
I agree with Mr Patricof. And until then is he donating the difference in taxes to the Treasury or to charity?
Like minded venture capitalists could start a movement. Mr Buffet often notes he pays a lower marginal rate than his secretary. All of these folks could voluntarily correct this issue.
Until they do I'm not convinced it isn't just good publicity on their part.
Like minded venture capitalists could start a movement. Mr Buffet often notes he pays a lower marginal rate than his secretary. All of these folks could voluntarily correct this issue.
Until they do I'm not convinced it isn't just good publicity on their part.
2
Obviously the carried interest should be eliminated, here's another thought, let's put a ceiling on the amount of capital gains and dividends taxed at lower rates. For example, let's say the first $10,000 is taxed at the lower rate and anything over is at ordinary rates. That way, 95% of taxpayers will pay the lower rate on all their dividends and cap gains and the cost of this tax break will be reduced by 95%.
As a CPA for the past 25 years, I realize a lot of people don't understand the tax code when I tell them how much this tax break benefits the super rich.
If you have Turbo Tax or other tax program on your computer, do 2 tax returns for a couple making a $100,000 in wages and one making $100,000 on dividends and cap gains, the difference in tax is close to $20,000 (including SS withholding) with the working couple paying more.
Why is earned income taxed at a higher rate than unearned income in this country?
As a CPA for the past 25 years, I realize a lot of people don't understand the tax code when I tell them how much this tax break benefits the super rich.
If you have Turbo Tax or other tax program on your computer, do 2 tax returns for a couple making a $100,000 in wages and one making $100,000 on dividends and cap gains, the difference in tax is close to $20,000 (including SS withholding) with the working couple paying more.
Why is earned income taxed at a higher rate than unearned income in this country?
87
Yes, we should close your tax loophole and I appreciate that you realize this and have come forward publicly. But we should also close the capital gains loophole. The idea that unearned income should be taxed at a lower rate than income from work is Heather Bresch- and Martin Shkreli-type thinking.
Behind every investment decision is the desire to make money by doing absolutely nothing. But as a country we've decided that investors need incentive to invest. Think about that for a moment. These are people who feel not only entitled to make money off of the labor of others but who also feel entitled to pay a lower tax rate than those who are laboring. And they often are the same group of people don't feel that workers should be "incented" to work by the prospect of earning a decent living.
Yet in this country we still try to keep a straight face when we say that we believe in hard work and personal responsibility. Actions speak louder than words. It's time we ended wealthfare as we know it.
Behind every investment decision is the desire to make money by doing absolutely nothing. But as a country we've decided that investors need incentive to invest. Think about that for a moment. These are people who feel not only entitled to make money off of the labor of others but who also feel entitled to pay a lower tax rate than those who are laboring. And they often are the same group of people don't feel that workers should be "incented" to work by the prospect of earning a decent living.
Yet in this country we still try to keep a straight face when we say that we believe in hard work and personal responsibility. Actions speak louder than words. It's time we ended wealthfare as we know it.
20
I applaud Mr. Patricof for writing this piece. I wish that he would have not mentioned the national debt. That is not even a consideration in my opinion. Borrowing for the US is so low, that we should not worry.
Unfortunately, politicians, particularly the right wing, are not worried about these loopholes, because venture capitalists and others that claim capital gains apparently make the world go around. The right is not worried about the working mom who barely gets by, but by all means, give the breaks to the big dog who can donate to my campaign.
Unfortunately, politicians, particularly the right wing, are not worried about these loopholes, because venture capitalists and others that claim capital gains apparently make the world go around. The right is not worried about the working mom who barely gets by, but by all means, give the breaks to the big dog who can donate to my campaign.
The rich often feel that they are over taxed. Roger Ailes himself has suggested that left to their own devices, the American people would tax the most successful in this country out of any incentive to be successful.
It is a logical argument- even when taxed at the same rates the wealthy support the government more than they take out of it in many ways. But that is a simplistic perspective- taxation is the primary tool we have to prevent the excessive concentration of wealth towards a small percentage of our populace. We have long since reached the a point where resources are being hoarded by the wealthy at the expense of the majority of Americans- especially the non-professional segment of the middle-class.
This is beginning to create economic instability and a dangerous political climate in this country that allows the rise of demagogues like Trump and increases the anger in our politics in general. Time to turn the screws on the folks who are the key beneficiaries of the new economy and get the capitol circulating again.
Clearly capitalism needs the guidance of progressive taxation. The voters better start following the money and stop electing politicians who aren't willing to raise taxes on the rich- unless they are already rich.
Incidentally, Hillary Clinton pledges to raise taxes on the wealthy and Obama already has.
It is a logical argument- even when taxed at the same rates the wealthy support the government more than they take out of it in many ways. But that is a simplistic perspective- taxation is the primary tool we have to prevent the excessive concentration of wealth towards a small percentage of our populace. We have long since reached the a point where resources are being hoarded by the wealthy at the expense of the majority of Americans- especially the non-professional segment of the middle-class.
This is beginning to create economic instability and a dangerous political climate in this country that allows the rise of demagogues like Trump and increases the anger in our politics in general. Time to turn the screws on the folks who are the key beneficiaries of the new economy and get the capitol circulating again.
Clearly capitalism needs the guidance of progressive taxation. The voters better start following the money and stop electing politicians who aren't willing to raise taxes on the rich- unless they are already rich.
Incidentally, Hillary Clinton pledges to raise taxes on the wealthy and Obama already has.
15
> resources are being hoarded by the wealthy
The wealthy invest their resources in future production. All benefit, even those who lust for bloody sacrifice.
The wealthy invest their resources in future production. All benefit, even those who lust for bloody sacrifice.
Explain then the current state of affairs where the middle class is not benefitting the way they were when the rich were taxed at a much higher rate following WWII.
Of course the people who created successful businesses benefit the overall economy in many ways, but it is up to the government and taxation to prevent the debilitating concentration of wealth that can ultimately destroy a flourishing middle class and the very meritocracy that made America great and differentiated it from the class stratification of European societies.
The proper rate of taxation is a delicate choreography that cannot be determined by the very wealthy as it is now. The Goldilocks point is likely just short of the rate where the plutocracy begins a mass migration to avoid paying it.
Certainly it needs to be the point where capitol does not become dominated by so few.
Of course the people who created successful businesses benefit the overall economy in many ways, but it is up to the government and taxation to prevent the debilitating concentration of wealth that can ultimately destroy a flourishing middle class and the very meritocracy that made America great and differentiated it from the class stratification of European societies.
The proper rate of taxation is a delicate choreography that cannot be determined by the very wealthy as it is now. The Goldilocks point is likely just short of the rate where the plutocracy begins a mass migration to avoid paying it.
Certainly it needs to be the point where capitol does not become dominated by so few.
1
Most Americans have no idea that this carried interest provision in the U.S. tax code even exists. Perhaps no other provision shows the utter greed, and disdain for the American belief in fairness of those who benefit from this rule. It also has to be understood that we are not talking about a few hundred dollars of tax deductions taken out of a normal paycheck. The amounts lost to the treasury are in the tens and even hundreds of millions of dollars per non taxpaying investment consultant. Is it any wonder that so many Americans feel the system is tilted against them when their children cant keep up with the costs of a higher education while others rape the system for all they can. Time for a big change,
25
Regarding those here who prefer we go further, and eliminate tax preferences for all investors, that would be terrible for the country. Incenting investment is a primary tool the govt has to spur economic growth. All political candidates, in some way, talk about "getting the economy moving" or job/wage growth. Exactly how can the govt do that ? Tax policy and favorable treatment of desirable behavior is one of the best tools. Is it really desirable to discourage risk taking by business ? Is it really desirable to incent invesors to move their assets away from the stock market ? Good luck expanding factories and hiring workers with reduced incentive to invest. Good luck with that 401k plan in a shrinking economy.
Nobody wants to pay any taxes at all, and few understand the tax system. The idea that the little guy pays more is ignorance. I help a close relative with her taxes and investments. She is elderly and has a very low income. She pays ZERO taxes. Her income is low enough the IRS does not even require her to file a return anymore. So exactly how are the "rich investors" pying less taxes than the poor ? Less than zero ?
Nobody wants to pay any taxes at all, and few understand the tax system. The idea that the little guy pays more is ignorance. I help a close relative with her taxes and investments. She is elderly and has a very low income. She pays ZERO taxes. Her income is low enough the IRS does not even require her to file a return anymore. So exactly how are the "rich investors" pying less taxes than the poor ? Less than zero ?
2
Your point is difficult to understand because you are conflating your aunt who has very little income with investors who are bringing home millions or billions annually. Your aunt is not a "rich investor" and would not be hurt by closing the carried interest loophole. As for your claim that the present situation is necessary to spur the economy, sorry there have been far more jobs lost and factories closed under this model than the reverse. So, in neither case does your premise support your conclusions.
> Is it really desirable to discourage risk taking by business ?
It is if you lust for destruction as an end in itself. The nihilism that dominated German universities in the 1920s and 1930s is spewing out of our universities. We must return to the rational, life-loving Enlightenment.
It is if you lust for destruction as an end in itself. The nihilism that dominated German universities in the 1920s and 1930s is spewing out of our universities. We must return to the rational, life-loving Enlightenment.
Thanks, Alan, for this concise and helpful piece on the long overdue fix to the carried interest tax rate. There are many areas available for improvement in our tax code, which has suffered from the fallacies of conservative ideology for too long. If we, as a country want to return to a more broad based prosperity, increase funds available to improve education and infrastructure, and end the ridiculously high compensation of some C level workers, our first step is to increase upper level tax burdens, through both rate increases and loophole fixes like this one.
17
The unit of measure taxes are paid in is DOLLARS not percent. The rich pay a disproportionately large share of federal income taxes. HOWEVER Mr. Patricof is welcome to lead by example. He and Warren Buffer (another proponent of higher taxes) should put their money where their mouths are. The US treasury accepts donations.
2
That's the way it works, Mr. Washington. It's called Progressive taxation, and it is based on minimizing the pain of paying taxes for Americans as a whole. A thousand dollars, for example, feeds a lot of hungry children for a long while to poorer people, while a thousand is a drop in the bucket for the top tier earners.
1
Mr. Patricof,
Thank you for highlighting for everyone just how weak this policy is.
Can you be sure to send a personal note to Senator Charles Schumer
D-NY to remind him of such. It seems like over the years he has been
opposed to any change in this weak policy. And while you are at it, why
wait for a change in the law? I'm sure the U.S. Treasury will glady accept
the difference in what you pay in carried interest and ordinary income.
Thank you for highlighting for everyone just how weak this policy is.
Can you be sure to send a personal note to Senator Charles Schumer
D-NY to remind him of such. It seems like over the years he has been
opposed to any change in this weak policy. And while you are at it, why
wait for a change in the law? I'm sure the U.S. Treasury will glady accept
the difference in what you pay in carried interest and ordinary income.
2
Good heavens, Chuck Schumer must be turning in his grave (in the Hamptons)!
2
I once saw a yacht named "Carried Interest." Nice.
162
There was one with that name here in Hilton Head recently.
But without the "Carried Interest" his yacht would only be half the size! How can he impress our elected officials he is trying to lobby? That would be so unfair!
Thank you for a some much needed honesty.
It's rare to hear the 1% speak out against their own self interests.
It's rare to hear the 1% speak out against their own self interests.
19
Kudos
56
Nice start, but there are many single-benefit loopholes and special legislations that need purging.
As mentioned, though, the most meaningful change would be the actual lessening of the undue influence by major financial backers and special interests in Washington, state capitals, and city halls.
Tall order, but as the writer is indicating, we need to get fairness and decency back on the front burner.
As mentioned, though, the most meaningful change would be the actual lessening of the undue influence by major financial backers and special interests in Washington, state capitals, and city halls.
Tall order, but as the writer is indicating, we need to get fairness and decency back on the front burner.
2
Taxing carried interest as ordinary income is an excellent idea.
This tax preference costs about 10 B /year.
However not taxing capital gains and all dividends as ordinary income costs about 160 B /year.
Not taxing unrealized capital gains at death[step up in basis] costs about
43 B /year.
About 400 B in tax due under the present tax code is not collected.
see http://www.nytimes.com/interactive/2013/03/17/business/tax-breaks-mostly...
http://www.economist.com/news/united-states/21578387-irs-has-behaved-bad...
Conservatives will complain that I am assuming that dividend and cap gain income is the government's money and not the property of the citizen.
But the same could be said about wage income.
People with the same income [no matter the source] should pay the same total tax.
This tax preference costs about 10 B /year.
However not taxing capital gains and all dividends as ordinary income costs about 160 B /year.
Not taxing unrealized capital gains at death[step up in basis] costs about
43 B /year.
About 400 B in tax due under the present tax code is not collected.
see http://www.nytimes.com/interactive/2013/03/17/business/tax-breaks-mostly...
http://www.economist.com/news/united-states/21578387-irs-has-behaved-bad...
Conservatives will complain that I am assuming that dividend and cap gain income is the government's money and not the property of the citizen.
But the same could be said about wage income.
People with the same income [no matter the source] should pay the same total tax.
226
And not taxing mortgage interest on homes cost $75-100B (and has been shown multiple studies to primarily motivate the purchases of larger homes than would have been purchased without the deduction).
4
There are of course other tax loopholes or preferences that should be considered.
They are discussed in the two links in my post above.
They are discussed in the two links in my post above.
thank you, and well said...now for some action...
Mr. Patricof is on the right track, for which I thank him. Has he purchased any Congresspersons that he can get to vote his way? I doubt it. He might even be too honest. I expect no change in the foreseeable future.
I would ask Mr. Patricof to consider one more step: eliminating the favorable treatment of capital gains (both in income tax and estate tax). We don't actually need to give investors extra incentive. Investment is going along just as one would expect in an economy that is demand-limited. Moreover, most "investment" is just shuffling money around from one security to another; it doesn't constitute productive investment. It isn't all speculation, but it doesn't contribute to investment in the real economy.
Finally, our financial sector is vastly overblown and paying rent (in the economics sense) in huge quantities by skimming off the flow of other people's money. That has to be stopped. Good tax policy can do it. Forbidding companies from deducting from net income the cost of handing out bonuses and other grossly exaggerated compensation would be a starting point.
I would ask Mr. Patricof to consider one more step: eliminating the favorable treatment of capital gains (both in income tax and estate tax). We don't actually need to give investors extra incentive. Investment is going along just as one would expect in an economy that is demand-limited. Moreover, most "investment" is just shuffling money around from one security to another; it doesn't constitute productive investment. It isn't all speculation, but it doesn't contribute to investment in the real economy.
Finally, our financial sector is vastly overblown and paying rent (in the economics sense) in huge quantities by skimming off the flow of other people's money. That has to be stopped. Good tax policy can do it. Forbidding companies from deducting from net income the cost of handing out bonuses and other grossly exaggerated compensation would be a starting point.
254
A clarification: "paying rent" should read "paying rent to their own personnel".
18
Kudos to Mr. Patricof. Regarding capital gains - there is an economic justification but it should be focused to encourage business investment. On personal tax returns, capital gains should be capped so the wealthy don't unduly benefit.
2
I'm glad to see that some venture capitalists have a soul and are willing to speak up. Others, not so much.
I hope that our government does the right thing and closes this loophole because not enough people will do the right thing until they are compelled by the law to do so.
I hope that our government does the right thing and closes this loophole because not enough people will do the right thing until they are compelled by the law to do so.
323
If this issue were to be the subject of a national referendum I'm sure that the repeal would win by at least a 4:1 margin and yet our government still accedes to the outsized influence of billionaire hedge fund managers and other financial sector interests.
4
Income is taxed when it is earned. Managers of someone else's money should pay the same tax as anyone else providing a service. Money that is used after it has been taxed, which may or may not result in a profit, is appropriately treated differently. By law if you work for someone you get paid. There is no guarantee you will make any money when you then invest that already taxed money. Without individuals taking such, risks capitalism cannot flourish. Therefore profit in the sale of one's home or purchased stock is treated differently as it should be.
I find this a disingenuous attempt at looking charitable and appearing to want to do the right thing, when absolutely no change in the law is actually required to do so.
Application of the tax code generates the minimum tax required. The last time I checked, the Federal government will accept checks of any amount ABOVE the amount due and happily apply that to the federal deficit. It's like paying extra principal on your home mortgage.
So if Partricof (and Gates and Buffett and all the rest) really wants to pay more tax, it's fairly simple: write a check today and mail it. Make it for a billion. The Feds will cash it, your conscience will be clear and our deficit will be a tiny bit lower.
If you aren't willing to do that, then keep your opinions to yourself because you're just trying to look great and generous when actually you're just looking for underserved credit.
Application of the tax code generates the minimum tax required. The last time I checked, the Federal government will accept checks of any amount ABOVE the amount due and happily apply that to the federal deficit. It's like paying extra principal on your home mortgage.
So if Partricof (and Gates and Buffett and all the rest) really wants to pay more tax, it's fairly simple: write a check today and mail it. Make it for a billion. The Feds will cash it, your conscience will be clear and our deficit will be a tiny bit lower.
If you aren't willing to do that, then keep your opinions to yourself because you're just trying to look great and generous when actually you're just looking for underserved credit.
2
It was created to treat investment gains different from ordinary income, because capital gains are derived from funds that have already been taxed.
The paltry amount of tax not collected due to this "loophole" is a rounding error when compared to the biggest tax bailout currently provided - the mortgage interest deduction. The amounts not collected by allowing home borrowers to deduct the interest they owe on their mortgages dwarfs carried interest.
And if you (and Warren Buffet) think you're not paying enough tax your solution is simple - pay more in tax. You don't have to pay the bare minimum. The IRS will take whatever you want to send them. Feel free to send as much as you feel you owe, no one is stopping you.