Wall Street Wind Fall

Judy · Admin Posts: 75 Join date: 2007-09-19

Quote:

A lucky few Wall Street types have been abusing a loophole in the U.S. tax code so aggressively that they now have a lower effective tax rate than most middle-class Americans. These millionaires and billionaires cost taxpayers billions every year by avoiding paying their fair share to Uncle Sam.

Many of the cheaters are modern day robber barons making hundreds of millions of dollars a year, with the top earner last year earning $1.7 billion. They are employed by some of the world’s wealthiest financial institutions to manage investment portfolios, known as private equity funds. The portion of their income that qualifies for the loophole is known as “carried interest,” or “the carry.”

The loophole allows these fund managers to treat part of their income as capital gains for tax purposes. As a result, they pay the capital gains rate of 15% on a portion of their income, instead of the highest income tax rate of 35%.

The details of carried interest controversy are actually quite a bit more complicated than that, however.....

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“Three groups spend other people's money: children, thieves, politicians. All three need supervision.” Dick Armey