“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Saturday, June 23, 2007

Killing the Golden Goose

It is hard to believe that these three mediocre people, Rep. Sander M. Levin (D-Mich.), Rep. Charles B. Rangel (D-N.Y.), and Rep. Barney Frank (D-Mass.) would have so much power over the health and wealth of the US economy, but it is true. Plan accordingly.

Democrats Propose New Tax Rate on Investment Funds
By David Cho
Washington Post Staff Writer
June 22, 2007; 5:01 p.m. ET

Top House Democrats today introduced wide-ranging legislation that would more than double the tax rate that private equity firms, venture capital funds and many hedge funds pay on their gains.

The proposed legislation would cause the most comprehensive change to the capital gains tax law in decades. It was authored by Rep. Sander M. Levin (D-Mich.) and introduced by Rep. Charles B. Rangel (D-N.Y.), chairman of the House Ways and Means Committee, and Rep. Barney Frank (D-Mass.), chairman of the Financial Services Committee.

The bill was introduced on the first day of trading of private equity giant Blackstone. Its IPO was one of the reasons Congress became interested in examining how such firms are taxed.

The IPO became one of the richest in Wall Street history this morning when it began trading about 18 percent above its offering price of $31 per share. Late in the afternoon, the stock was holding onto those gains and was trading just shy of $36 per share.

In a statement, Levin said the proposed legislation "would ensure that investment fund managers who take a share of the funds' profits as compensation for investment management services, known as 'carried interest,' would be taxed at an appropriate ordinary income tax rate."

It said that because of their funds' partnership structure, the managers of private investment partnerships currently are able to receive compensation for these services at the 15 percent capital gains tax rate rather than the ordinary income tax rate of 35 percent.

"Congress must ensure that our tax code is fair," Levin said. "We have to be sure that the lower capital gains tax rate is not being inappropriately substituted for the tax rate on wages and earnings."

He added, "Investment fund employees should not pay a lower rate of tax on their compensation for services than other Americans. These investment managers are being paid to provide a service to their limited partners, and fairness requires they be taxed at the rates applicable to service income just as any other American worker."

The bill would not affect members of partnerships who invest their own money, and fund managers who did so would continue to pay the 15 percent capital gains tax rate on their own profits, Levin said.

"The capital gains rate will continue to apply to the extent that the managers' income represents a reasonable return on capital they have actually invested in the partnership," said the statement issued by Levin's office.

The proposed legislation represents the first comprehensive measure to raise rates on the tax treatment for all hedge funds and buyout firms, which have drawn congressional attention because of billion-dollar paydays for fund managers, Bloomberg news service reported.

Lawmakers are targeting carried interest as part of a broader examination of how hedge funds and buyout firms are taxed. Informal estimates show that taxing carried interest at the same rate as salaries may generate at least $4 billion a year in additional taxes, Bloomberg said.

Unions have increasingly criticized the tax treatment of carried interest as buyout firms acquire more companies, putting jobs at risk, the news service said.

"What we're talking about is making the tax system more fair and equitable and transparent to Americans," said Dan Pedrotty, director of the office of investment at the ALF-CIO, the largest U.S. labor federation.

However, the bill has come under sharp criticism from fund managers and trade groups, Bloomberg reported.

"Congress is just looking for an easy target to shake down and raise some more taxes," said Bill Burnham, managing general partner of Inductive Capital LP, a Menlo Park, Calif., hedge fund.

A separate, narrower bill in the Senate that would force hedge funds and buyout firms that go public, such as Blackstone, to pay taxes at corporate rates as high as 35 percent instead of their current rates as partnerships. Individual partners now pay taxes as low as 15 percent on their share of income.

Staff writer William Branigin contributed to this report.


  1. We reap the results of 6 years of a total lack of conservative leadership.
    The Rudder unmaned, the ship goes where it, and outside forces decide it will go.
    The ship of state has been lost at sea.

  2. You give the Captain credit he does not deserve, doug.

    The ship is not adrift.
    She's making headway against the tide.

    The Captain stands steady at the helm.
    While all around make for the exits or don life vests.

    All but the devout, those whose souls are secured, by their hard work before the mast.

    In Iraq, the Captain has heeded bad advice, but on the southern frontier, the course he steered is clearly his.

    As to taxing matters, the beat goes on. Make more, pay more.

    Make less, divest.

  3. Four score more Taliban KIA in Afghanistan says ABC via an elijah link.

    Where'd they come from, where are they goin'?
    If not Pakistan.

    Where are the mussulmen holding 48 nuclear weapons and building the reactor needed to make more, better warheads?
    If not Pakistan.

  4. Move offshore.
    Move some assets offshore.

    When is capital gain to be judged as income?

    Why have differing rates of taxation, at all?

  5. I don't think it's considered to be polite to take excessive notice of that particular Muslim Nation.

    ...We're having great weather here, and I enjoyed an old Albert Brooks Classic last night!
    Shannon AZ ?
    I think it was where they first parked their motorhome.
    Fantasy much preferable to some unmentionables on the ground.

  6. Safford AZ
    Population 3,000 in 1984, how about now?

  7. AmeriKKKa sucks!

    George W. Bush, Halliburton, Iraq, Abu Ghraib, Vietnam, Dresden, Hiroshima,..

    So why is AmeriKKKa flooded with immigrants and would-be immigrants from all over the world?

    Economic opportunity, that's why!

    Therefore we must conclude, that all these would be Nazis want to participate in the 4th Reich because of evil profits: “Oh, yeah, too bad about gassing all them Jooos, but I wanted to live the vida loca, with my family there in Berlin.”

    So, as far as immigration problem goes, I don’t see why we shouldn't kill the AmeriKKKan economy, and have these would be Nazis wanting to seek material gain in AmeriKKKa, go elsewhere.

    The Commissar

  8. Mat,
    Another Classic Oldie you'll enjoy if you haven't seen yet, or probly in rewatching like I did:
    "Lost in America"
    Albert Brooks.
    Great laughs, maybe Brooks' best.
    I was reminded by a caller to Dennis Miller who pointed out a Classic Larry King vignette as they're rolling the credits.

  9. Safford, about 10,000 folks, now a days. More than you'll need to know

  10. Set an unattainable goal, pursue it 'til it strains things to the breaking point, throw up your hands.
    Say the Curse!

    General’s Report on Iraq Progress Has Competition
    The Bush administration will seek a range of views beyond the report by the U.S. commander in Iraq.

    American intelligence agencies, according to senior administration and intelligence officials, are already preparing to submit their own assessment of Iraq’s progress. That is expected to include a judgment about whether Prime Minister Nuri Kamal al-Maliki is willing or capable of striking the kind of Shiite-Sunni political balance Mr. Bush said was the ultimate objective of the American strategy, and whether the passage of political compromises, none of which have yet cleared Parliament, have any hope of reducing the violence. That report will begin circulating, officials said, around the time that General Petraeus and Mr. Crocker arrive in Washington to testify about what the troop increase has accomplished.

  11. Thanks, Doug. It sounds vaguely familiar. Looking for the torrent as I type. Oh, and thanks again for the previous recommendation, The Big Lebowski. Definitely a classic!

  12. Hmm,.. Albert Brooks..

    "Looking for Comedy in the Muslim World"

    I like this guy already. :D

  13. Commissar,
    Statistics show that the majority of immigrants from the south represent a net DRAIN, not plus, for the Economy.
    Low education, low skilled workers do not a vibrant economy make, once the Welfare Load gets dialed in.
    Big Change from before the Welfare State, and before Teddy's 65 masterpiece giving preference to the lowest qualified, and the admin letting the lowest of the low come and stay illegally.

  14. If This Poll is correct California might elect Mitt Romney "King."

  15. Did somebody say something about Honky Tonkin'?

  16. Ballad of the Green Beret

    They might have looked goofy marching along with all those little vietnamese guys trailing along behind them like little ducklings, But, Damn, they had a Great Song.

  17. Should we take out Pakistan's nukes desert rat?

    We have the capability.

  18. We meaning the United States of America

  19. elijah,
    If there was ever a need for the US to take preemptive action against a Nation-State, in the War on Terror, it is and always has been in Pakistan.