Author: Sylvia Burley

As everyone knows by now (unless you are living under a rock, don’t watch TV or read anything EVER), our country is in a crisis and if we don’t raise the debt ceiling America could default on its loans which would result in increased interest rates, the devaluing of the American dollar, Carmageddon (I think that already happened), yada yada yada.

Many proposed solutions have been discussed, dissected and disseminated, but there is one in particular I’d like to focus on.

It is said that if a loop in the tax code that allows hedge fund managers to pay lower taxes on a substantial portion of their income is closed, this could result in the government receiving millions, if not billions in dollars from just a handful of people.

Hedge fund managers typically receive two forms of compensation: a management fee, typically around 2 percent of a fund’s total assets, and “carried interest,” which is typically around 20 percent.  The management fee is taxed as ordinary income.  The carried interest, however, is taxed as a capital gain, meaning managers pay rates as low as 15 percent on that part of their compensation.  Meanwhile, you and I pay a minimum of 30% on our income unless we are savvy enough to game the system.

For years lawmakers have been threatening to change the tax code so the “carried interest” is treated as regular income. Many argue, the tax code should not only be changed for hedge fund managers, but also the partners of investment firms specializing in venture capital, private equity, real estate and natural resources.  Of course, lawmakers are afraid to do this, preferring to focus only on the big, bad hedge fund managers who they know most of us abhor for their greed and obscene wealth.

Are your eyes glazing over yet? Stay with me; this is the part of the story that gets REALLY interesting.

Many believe a change in the tax code would likely result in the hedge funds restructuring themselves to avoid the tax by moving to off-shore tax havens or creating loan facilities that allow hedge fund managers to buy their shares of the funds by borrowing from the funds themselves.

In other words, these hedge fund managers, American citizens I presume, will put their own monetary gain before the well-being of the country in which they live and presumably claim to love.  This is nothing new as most of those considered super duper rich expect those with less to be “patriotic” which means sitting quietly while they rape and pilfer this country, its resources and its people.

Until ALL American citizens are ready and willing to make personal sacrifices for the good of the whole, I’m afraid this country will go the way of the Roman Empire and the many empires before them that are no more.

Source: CNBC

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