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Notes to myself, possibly of interest to others.
-- Bill Northlich

Sunday, October 3, 2010

Obama admin continues to cave...

There is absolutely no logical or ideological justification – not even the wildest, craziest reed-end of a hint of a justification – for a hedge fund manager paying half the tax rate of a trucker or a teacher or a doctor. The only thing the carried interest tax break accomplished was that it provided an incentive for people to work as hedge fund managers. This was purely and absolutely a handout to big campaign contributors. It’s so preposterous and indefensible that it’s not uncommon to see even Wall Street people admitting that it goes too far (see here for example)...

The measure passed in the Senate, and for the rest of the summer lobbying groups hounded both chambers for carve-outs. Venture capitalists and real estate partnership managers came knocking for exemptions. The lobbying heat got turned up… and who can say for sure whether it worked or not, but we do know what happened in the end. Congress adjourned yesterday without voting on the final deal, meaning that it can’t be taken up again until after election day, when the congress will most likely be turned back over the Republicans. At which point there will be no way the carried interest exemption will ever get rolled back...

So there you have it. One of the very stupidest laws on our books, one a new president initially elected with a sweeping mandate promised to overturn, will not in the end be changed. It will appear that many people tried to change it, and there will be a lot of Democrats in particular who will be able to say that they voted to end the tax break for hedge fund assholes. But in the end, quietly, nothing got done. And let’s see how much the KKRs and Paulsons and Soroses of the world end up giving both parties in reward in 2010 (note that KKR is one of Max Baucus’s top 5 donors this year; Paulson is in his top 20). Anyone wanting a preview need only look at who hedge funds gave the bulk of their money to in ‘08.
---Matt Taibbi

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