Hedge-fund managers, for whatever obscure reason, were and are paying taxes on their billions of ordinary income as though it were interest income ... at a rate equivalent to the long-term capital-gains rate. This is called a "carried interest" tax rate and has enraged the Obama administration and many ordinary citizens ... including myself. I have blogged about this in the past ... see: Carried Interest. A few years ago the highest capital-gains rate was 15% and this was why Warren Buffet's secretary was paying taxes at a higher rate than her boss.
The solution to this imbalance from our heads-up-their-tushes government was to increase the maximum capital-gains rate to 20% ... and not to eliminate this carried-interest tax treatment. And now the Obama administration, still in a snit, is suggesting that we raise the maximum capital-gains rate to 28% ... again treating the symptom and not the disease.
The result of course is that, in order to extract meaningful income taxes from hedge-fund managers, some non-millionaire ordinary investors are being punished ... perhaps this is because of many hefty Wall Street political donations?
This is plainly stupid! Fix the problem ... don't paper over it!
