Both the Seattle Times and the Wall Street Journal had articles today on Democratic plans to increase taxes on private equity firms; plans that have local Democrats front and center in the Congressional debate.
Brian Baird is a leading skeptic of the plan, intended to hit the managers of hedge funds and private equity investment houses. As the MSM coverage notes, the plan to soak the rich is running into opposition, mostly because it isn't very well thought out.
The proposed tax hike also pits Democratic interests against each other. On one hand you have the ubiquitous liberal mantra of "tax the rich." On the other you have the interests of public employee pensioners, whose unions are obviously heavily Democratic. Also in the mix against the plan in both articles is Joe Dear, Executive Director of the Washington State Investment Board. As in Joe Dear, former Gary Locke chief-of-staff and major Presidential appointee in the Clinton Administration. One would think he might know a thing or two about getting a message lobbied.
Beyond Baird's stated skepticism, Maria Cantwell is also obviously in a bind. She appeared to be tight-lipped with the Times, but the Journal says, "Washington Sen. Maria Cantwell fears it could reduce returns for her state's public-employee pension plan, which has reaped benefits from private-equity investments." It will be interesting to see how the delegation actually votes on this topic.
Aside from the potential hit to public employees, the proposed tax is but another example of tax increase ideas from Democrats that intended or not would end up disincentivizing capital investment. Interesting at how even some Democrats are starting to blanch at that.
UPDATE: Respectfully Republican has some thoughts on the issue as well.
UPDATE II: typo fixed.
Posted by Eric Earling at July 31, 2007 09:27 PM | Email ThisHe guys, you may wish to go back and see what JFK did.( YOUR HERO) He cut taxes.
Gee I wonder why?
In this case specifically, many groups both 'rich' and 'poor' benefit from Private Equity, Hedge Funds, and Venture Capital. The unions, Universities, and private investors all come to mind. Even non-accredited investors, i.e. the middle class benefit from the investment vehicles nowadays as the result of mutual funds that invest in these types of investments.
To give you an idea of how much unions' pension plans benefit from hedge funds, I'd like to point to a trader named Stevie Cohen who for a long time managed hundreds of millions of pension dollars for unions. He repeatedly surpassed the 'market' year after year, garnering returns of 40% or more for his clients. Sure he makes almost $1 billion annually for this performance [according to a recent article in Trader magazine], but as one of the few traders who can continually beat the 'market' he deserves such compensation as his talents are very, very rare.
Posted by: Gary on July 31, 2007 10:47 PMThey are now poised to raise the Cigar tax by 20,0000% from 4.5 cents to $10 which will kill massive jobs in this industry.
Bush has vowed to veto this.
Thanks W, these idiots need to be stopped!
Posted by: GS on July 31, 2007 11:32 PMThey sit around inventing stuff (new Viaduct, "mass transit") and then bill us for it!
Let's start honing down what we really need...
Thanks for carrying my torch.
Posted by: Rich on August 1, 2007 06:42 AMAnybody see the conflict of interest here. The Democrats are always preaching about how the rich ought to be taxed more but they fail to really nail them and them alone. Could it be that the Democrat politicians are themselves quit wealthy? Hmmm?
That is why I'm against raising taxes on the wealthy, because it always seems to make life harder for me.
Envy is undignified, at best, and always destructive.
If you want to see what the politics of envy will take any society take a look at the Democrat stronghold of Detroit and envy capitol of the world. The last supermarkets in Detroit closed recently and those who own property are losing their investments, everybody is losing but the "rich" (those who placed their future retirement investments in Detroit real estate) are really losing their ass. I hope this dynamic does nothing to make you feel better, but I am guessing that it does because you are a PATHETIC MISERABLE FAILURE.
I could carve a better man than you out of a banana.
Jack Van Nostrand
Troutdale, Oregon.
Jack Van Nostrand
Troutdale, Oregon
You're correct. If they really cared about us they would do those things. They should include playing football, driving race cars, hang gliding, bungee jumping, scuba diving, mountain climbing, and a whole host of other things that can get mommies baby hurt.
Posted by: REBEL on August 1, 2007 08:19 AMFederal tax liabilities.
Earnings by percentage:
0-20% income -- -2.3% tax, get more than they pay.
21-40% income -- 0.7% tax
41-60% income -- 6.0% tax
61-80% income -- 15.7% tax
81-100% income -- 80.0% The top 20% of earnings pay 80% of Federal taxes.
Top 10% pay 64.8% of taxes.
Top 5% pay 52.1% of taxes.
Top 1% pay 31.0% of taxes.
Tell me again how the "rich" don't pay their fair share?
Posted by: JCM on August 1, 2007 08:26 AMAnd now most of the union growth is in government. Let's see how those pension funds affect the dialogue.
My prediction: Within 20 years, the Republican party will include unions and the Democrat party will represent immigrants-legal or otherwise.
Posted by: swatter on August 1, 2007 08:30 AMThe Wal-Martization of America will be our economic downfall — not tax cuts for the so-called “rich," which because of the economic gains unionized public sector employees have enjoyed at the expense of the rest of us, are now starting to put THEM in the "rich" category — or at least make them "rich" by Democratic Party standards.
Posted by: The Firewalker on August 1, 2007 09:03 AMOne final note for conservatives out there, it has been repeatedly shown that trickle down economics don't work. The French tried it and it led to the sans culottes joining in the French Revolution and chopping lots of rich heads off. We have tried it, and passed on crippling debt, while not showing that economic growth actually speeds up. The stock market is not evidence of a strong economy--ask any economics professor. If you want to give tax cuts, it should be to the working poor, they spend 98% of their income, which means more of the money given to them will be spent here, rather than in overseas business and financial markets.
Posted by: Micah Rose on August 1, 2007 10:52 AMSorry about injecting some reality into all this rhetoric...
Thank you for spelling my name correctly when it was right in front of your face. If you cannot read what is in front of you, I have to question what you can see beyond that. If you remember the French Revolution, the people who went after the royals were the Third Estate, merchants, plus the non-estate, the sans culottes, the poor whose taxes were going up (bread taxes, about the same concept as sales taxes) while the members of the court were getting richer. Nobles at that point believed that if they got more wealth, it would naturally reach the lower classes. They lost their heads for that belief.
I would also remind you that the programs in real estate that you would call hand outs made the late 60s and early 70s the most prosperous time in our history. Easy housing credit, price controls and building of social infrastructure built a strong economy.
I would also note that Reagan Era tax cuts, that weren't coupled with big spending cuts are what is responsible for most of our national deficit, which is responsible for a third of government spending. Military spending in the Reagan Era is responsible for most of our national current fund deficit.
If you want a smaller government you have to come up with a revenue source to pay off our deficit. As any state legislator will tell you, small governments can't run deficits. If you want to cut government in half you will have to eliminate all social programs, all infrastructure programs, such as road building (have you driven on Washington's roads), and a goodly percentage of defense spending. Let's be realistic about this, Allan, not even you want to do that. You don't want a government that can barely regulate international trade, can't build roads, can't stop corporations from walking all over you, can't defend our borders, and can't respond in catastrophic situations. We may disagree on what should be covered under federal government, but I'm sure we don't disagree that the government should be concerned only with the deficit until further notice.
On the founding fathers: they didn't even agree with each other about how government should be run. On the same subjects, they often disagreed with each other, and even sometimes with themselves within a few years span. If you look at the Constitution, it is remarkably vague in crucial areas, and tends to defer to the fact that the political realities of any time will be more complicated than the Constitution strictly interpreted will be able to address. This is why there is a "necessary and proper" clause that allows us to have this debate. We should not interpret the Constitution as a dead document. It is a document that has life breathed into it in every generation.
I am not a socialist/communist. Wishing to take care of people who can't do it for themselves is a noble thing espoused by Christ himself. As I demonstrated earlier, it also makes economic sense. It is consumption that fuels our economy, not investment (though it plays a significant role), according to Keynesian economics, upping consumption--if debt is not also increased--increases income and creates jobs.
Next time check your spelling, at least, and if you have time, check your facts.
Posted by: Micah Rose on August 1, 2007 01:02 PMGo Bruce!
Posted by: Micah Rose on August 1, 2007 01:07 PMNYT: In Opposing Tax Plan, Schumer Breaks With Party
Posted by: Cryptometaphor on August 1, 2007 01:17 PMSince I was one of those posters you said was ignoring reality, I feel obligated to retort.
The aforementioned hedge-fund managers actually have quite a bit of their personal money in their funds. Take for example, John Arnold of Centaurus Energy. His fund is estimated to have over $2 Billion in assets, of which $1 Billion is his own money. Now despite a stellar track record (his worst year since he started Centaurus was only 178%in 2005) he still risks a huge loss of financial ruin if his trades were to go against him. An excellent case study was when he went head to head with Brian Hunter of Amaranth over the price of natural gas futures back in October. Arnold felt prices would fall and Hunter took a bullish position. To give you an idea of how over-leveraged Hunter was, he had Amaranth selling bonds to meet his margin calls. Regardless, nature, and supply/demand determined that natural gas prices were to go lower, and Hunter and Amaranth promptly imploded, with over $6 Billion in losses in one week.
The above story illustrates the types of risks these managers are willing to take. I personally don't know anyone willing to take the chance of losing over $1 billion of their own money in less than a week's time...do you?
If you're going to debate this issue Bruce, please don't use straw men such as, "They never invested any capital; they never risked anything."
Posted by: Gary on August 1, 2007 02:56 PMI always tip 20% on food under $50...and I round up to the nearest $5.
So, say I get a teriyaki plate for $8.69 -- like I did this afternoon at Himitsu , I round that up to $10 and give the waitress $2. A $50 dinner, with a guest at a good dinner place like Claim Jumper, nets the server a $10 tip.
Why do I do this? Because it's the fastest way possible to put the most capital into the hands of the minimal wage workers who will benefit the most from it...moreover, they will use this money on other retail goods and services and spur the economy onward.
I also like tipping big because if I mention it to the typical Lib, who is normally a cheapskate, he will whine and moan about the "class system", but he really doesn't want to pony up the money -- he just wants to make a lot of laws to get other people to pay.
Social Equity == Big Tips
Posted by: John Bailo on August 1, 2007 03:52 PMKeynesian economics has long been refuted as the fraud it is. Try the Austrian school... read some Bastiat, Hayek and Von Mises. Then you'll actually KNOW something about economics.
Posted by: John Galt on August 1, 2007 04:36 PMBy the way, tipping higher only helps the service industry. Do you tip every single lower income worker you come across? Do you tip janitors who clean your buildings, or lunchladies who feed your kids? Do you leave tips at the fast food joints you hit on the way home? Do these tips reach the mentally ill, the homeless or the disabled? I make under 30 thousand a year and tip 20% to 25%. Being a cheapskate is neither liberal nor conservative, I've known them from both political bents. I grew up poor and my father earned about a quarter of his income on tips, people who work on tips often have the worst of it: no healthcare coverage, low wages, and bosses who don't give a crap about them. I only break from good tips if the service is rotten.
Posted by: Micah Rose on August 1, 2007 10:08 PMIf you look at countries other than the U.S., defense is not the focus of government. We spend more than the next 20 countries combined and have the unique distinction of not being invaded by land troops in more than 150 years. The constitution specifically gives the regulation of international and interstate commerce to the federal government (Article I, Section 8). When most products and businesses operate across state lines, the states don't have jurisdiction. Pollution in the Puget Sound affects salmon in Alaska, which makes it an interstate issue to be regulated by the federal government. As evidenced by the Enron scandal, energy travels across state lines. Before the 10th amendment was put in by James Madison, there were already some clear definitions of what the federal government was in charge of; but you didn't read that part of the Constitution, Allan. You said you would deal away with the Department of Education, the Department of Energy, and the Environmental Protection Agency. The problem with that statement is that the states don't actually have jurisdiction to regulate any of those areas if you take a strict reading of the Constitution, which most Conservatives do.
Please try not to resort to name calling just because someone effectively slams your rhetoric.
Also, the problem in the Middle East is far more complicated than a Carter screw up. I think Carter was an ineffective President. That's why Reagan beat the tar out of him. Carter should not have been re-elected. I would acknowledge though that policies under LBJ, and Nixon were no better, and Reagan continued the same bad course. LBJ allowed Saddam Hussein to take power in the late 60s, Nixon backed the Shah, whose brutal policies were responsible for the Islamo-fascist uprising, and Reagan trained Osama bin Laden in Afghanistan. These facts are a matter of public record. There hasn't been a president liberal or conservative who has gotten it right in the middle east, and I'm inclined to say it is largely not their fault. That these regions are inherently unstable due to their lack of history as independent nations in the past 500 years, and largely tribal nature. These nations need to be left to grow and develop on their own, with commercial ties being our primary ways of regulating their behavior. It's much less expensive that way.
I'm done talking with you, Allan.
Posted by: Micah Rose on August 1, 2007 10:51 PMRemember, he supported the "hate crime" legislation recently passed in the House.
Not fooled, here.
Posted by: Independent Voter on August 2, 2007 05:11 AMIncreasing taxes and regulations on investments would have an impact. Without a question, the impact would be negative. It will reduce investments in the United States. Fund managers may and do invest off-shore. Additional taxes will encourage more off-shore investments, reducing investments in the United States.
Bruce and others, the business owner, manager, firefighter, etc. are taxed on capital gains, not income, when they profit from their investments in stocks, 401K and other similar interest including the sale of their business, homes or other assets. Income tax is a tax on income, it is not a tax on profits derived from investments or the sale of assets. Business owners, managers, firefighter, etc. pay income tax on income earned.
Targeting a specific group adds to the complexities of the tax code and will eventually tax other groups similarly to close tax loopholes. All in favor of adding to the tax code raise your hands. All in favor of increasing taxes raise your hands. All in favor of decreasing investments into the economy raise your hands. All oppose call your representatives and tell them that you are against increasing taxes and complexities and less investments.