Hedge Fund Managers are Greedy Rapists
I’ve been thinking about an article I read yesterday morning while skimming through the newspaper. The story was about how the House voted to extend popular tax breaks like mortgage interest and sales-tax deductions. It also mentioned how it was going increase the tax rate on income earned by hedge-fund managers from 15% to 35%.
I’ve heard that hedge-fund managers made hundreds of millions or even billions of dollars every year, but I wasn’t sure how much, so I searched the internet and found this list. The highest paid hedge fund manager in 2008 was James Harris Simon, who runs Renaissance Technologies Corporation. He “earned” $2,500,000,000. He paid a lesser income tax rate than I did and what I presume is much lesser than many of you readers did. The next three highest paid managers on the list all earned over a billion dollars.
Who is this guy and what does he do to make so much money? He’s a mathematician. He used to teach at MIT and Harvard, and he also did communicatioins research for the Defense Department. He probably was compensated fairly well for those services, and his work was what we might call “productive.” He educated people and he developed new mathematical theorems to improve science, and he probably helped the DOD in some way.
Over twenty years ago he figured out how to use his mathematical genius to develop “computer-based models to predict price changes in easily-traded financial instruments.” Those models run on computers that buy and sell stocks and commodities all over the world. His models must work extremely well if he can earn high profits for his investors and pay himself 2.5 billion dollars in one year.
But what he’s doing is not “productive.” It’s more like rape. Instead of using his brilliant mind as a rocket scientist or an engineer of some sort, he’s basically using it to satisfy his lust for money by skimming billions of dollars off assets all around the world.
And thanks to George W. Bush and his loyal cabal of Republican brown shirts, he has paid a lower tax rate than me since 2001.
What are the Republican congressmen saying about the House Bill?
Republicans called it a tax on investment.
“It is nothing short of a new tax on the various investments needed to start the new business and create economic growth,” said Rep. Dave Camp, the top Republican on the tax-writing House Ways and Means Committee.
Republicans hate taxes. They love cutting them, and because they had been in power so long since Reagan was elected, they’d cut taxes on obscenely rich people from 90% during the Eisenhower era to just 15% for Mr. Simons and company.
This whole idea that it’s wrong for the top 1% of earners in our country to be taxed at very high rates is one of the many reasons are country is so far in the hole. These people are taking all the money and paying much less income tax than if all that money was spread amongst people who paid normal income taxes.
What if Mr. Simons was taxed at a rate of 90% like he would have been during the Eisenhower era? How much would he have left to live on each year? $250,000,000. Oh… that’s too bad. And could our government use the $2,250,000,000 that it would have collected every year? I think so.
I’ve said it before and I’ll say it again: IT’S NOT WRONG TO TAX THE RICH! Increasing the rate on hedge-fund managers from 15% to 35% is a step in the right direction, but they really ought to be paying well over 50%.
Might have stressed that this is the break they have been getting–paying capital gains taxes instead on income tax. These investment advisors and hedge fund managers can take advantage of this tax structure because they are often compensated through a scheme that, in part, pays them according to the returns on the fund. The industry standard for hedge fund managers is “two and twenty,” which is shorthand for an “overhead” fee of 2% of capital under management plus carried interest (often called a “carry”) of 20% of the returns on the fund. Thus a $100 million fund earning 20% would pay its fund manager $2 million for overhead and $4 million in carry. The carry portion of their compensation is treated under the tax code as capital gains for the fund manager and is taxable at the much lower capital gains tax rate of 15%.
And the GOP thinks this if fair!