July 11, 2007
Taxing Hedge Funds
The hearings have begun on taxing hedge fund and private equity fund "carry" as ordinary income. The attack is based on 1) they make money, 2) they are speculators, and 3) they are instruments of change. The is another attack on the financial speculators (gamblers who do not "make shoes") by those who under-appreciate their role in a capitalist economy. There are other partnerships that allocate profits disproportionately to capital contributions: venture capital funds, which have a positive public image, REITS (holding land), oil and gas partnerships, and others. Either Congress must exempt these groups, proving that it is taxing "speculators" and risk the inevitable line-drawing problems, or it must include them in the interest of tax neutrality and absorb the social costs of regulating efficient forms of capital investment that do not tie a divison of return to proportional capital contributions. This is going to get very, very messy.
TrackBack URL for this entry:
Listed below are links to weblogs that reference Taxing Hedge Funds: