August 22, 2007

Economy : The Hedgies bitch and moan about taxes

Lightseeker at Feet To Fire has a great post up about all the private equity and hedge fund fucko's who are bitching about finally having to pay regular income taxes on their income. See how that's unfair and all?

Yeah, neither do I. Here's their reasoning...

Tax-break supporters say fund managers deserve the low capital-gains rate because they contribute their ideas to the investment, and those ideas represent "sweat equity." Reformers say lots of people have ideas, such as chefs and scientists, but they still have to pay full taxes on their incomes.

"There will be deals that don't get done. There will be entrepreneurs that won't get funded and turnarounds that won't get undertaken," said Rosenblum, who also is chairman of the Private Equity Council, an industry group.

Yeah, Rosenblum, I'm gonna call bullshit right about here. Fact is, 'sweat equity' is nothing more than a nice way of saying 'I have no skin in the game and I still want to get paid'. The reality is, you guys exist ONLY because of imbalances in asset valuation (occasionally the market goes crazy and prices good assets as if they were going out of business... it's called 'panic') and super cheap money. There isn't anything innovative about it. It's the corporate equivalent of flipping a house. You go in, you make some improvements, tighten the balance sheet, and sell it all back to the public when the market calms down. Just as that type of investing is causing a great deal of problems in the housing industry, it will eventually cause problems in the entire economy. That's your contribution to the economy. Wow. We're so blessed to have you.

Some in PE, namely the VC's who actually DO create wealth, aren't sold on the ideas of the company flippers.

Denver venture capitalist William Stanfill disputed this argument, saying his colleagues have displayed a "chicken little" mentality. He noted venture capitalists are paid very well compared with other industries.

It makes little sense to tax teachers, CEOs or surgeons at a higher rate than private equity executives, Stanford law professor Joseph Bankman said.

No, it doesn't make sense. Match point to the guy from Stanford.

All this comes at a time when people are starting to look closely at the third world-like income disparity that has permeated the US since Bush took office (we talked about this last week). Of course, not taxing PE and Hedge fund managers exacerbates this problem. Until we see growth on the lower end of the wage scale, the reality is that economy will NOT grow. It'll contract. It's happened before.

We called it the Great Depression then.

Posted by mcblogger at August 22, 2007 11:16 AM

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Yeah! What next? Y'all gonna pass the Fordney McCumber Tariff all over again? Huh?? HUH??? Or the Hawley Smoot Tariff?? razzafrazzarackinfrackin Hoover Hogs

Posted by: Harry Balczak [TypeKey Profile Page] at August 22, 2007 05:37 PM

They can call it the McBlogger Income Redistribution Act of 2007.

Posted by: mcblogger [TypeKey Profile Page] at August 23, 2007 07:21 PM

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