Often people attack CEO’s as being over paid, and that may be true for some, but in comparison to private equity and hedge funds, it looks like peanuts.
Hedge funds and private equity firms often pay the 15% federal capital gains tax rate, they do this by claiming their earnings as capital gains not income. So they pay about the same tax rate as someone who makes between $7,500 and $30,600 dollars in income. If the hedge funds and private equity guys were paying at the rate the CEO’s get paid, that would be an additional $6.3 billion dollars in taxes. The average income of the top 25 hedge fund managers was $570 million, each. The total compensation for all the top 100 paid CEO’s in my state of MN was $397 million, that’s combined, not each.
Hedge fund and private equity firms are lobbying hard to keep them from paying their share of the taxes in income that the rest of us do. We know it is income, that 5% fund management fee is income, not capital gains. The profits they make on the investments are income, unless it is their money, then it is capital gains but the rest is income. They also get paid a lot more than most of us do. Do you really think someone who makes $570 million should be paying less of a percentage in tax than the secretary? I don’t, write your congressmen and senator and tell them to ensure these guys pay their share in taxes. There is no reason they should not be paying the same as the CEO’s pay. And here’s more of a reason why I think so.
There should also be tighter controls on these industries as we saw with the credit scare two weeks ago, hedge funds making bad investments were at the center of this. Essentially what they did was, they went to Vegas, gambled and lost their shirt, when it came time to pay up their real bills, they didn’t have anything to pay them. So they ended up having the government bail them out to the tune of a few billion. So an additional $6.3 billion in taxes out of them sounds like a fair trade to me. If we have to fund their mistakes, they should have to pay at the federal rate of salaried people.