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Wednesday, April 18, 2007

Very Dumb New Right Wing Talking Point

Three cases make a syndrome but two are plenty for a blog post. The latest idiotic right wing talking point is that the tax code is too progressive and has gotten more progressive since Reagan was elected. This insanity appears on the WSJ editorial page (see Chait slice and dice Fleisher) and see Jared Bernstein attempt to seize defeat from the jaws of victory discussing Larry Kudlow's show. This claim is dumb in two ways. First it is, of course, false. Second, they really really don't want to go there.

Let me give a bit of advice to Republicans.

Talk about
statistics no
anectdotes ok
Bush no
Iraq no
WMD no
Democracy promotion no
the surge no
victory no
terrorism ok
Pelosi no
health care no
The French yes
French health care no
Hillarycare no
the veterans' admin no
Walter Reed no
HMO's no
Medicare plan D no
big Pharma no
the postal service finally you got it
Cheney no
Arabs yes
Rove no
the average American yes
the median American no
Islam yes
the average tax burden yes
government spending no
the deficit no
the bridge to nowhere no
Sunni Islam no
Social security no
socialism yes
Shi'ite Islam no
law and order yes
the rule of law no
Class war ok
tax progressivity No. Never. not ever. NO. Change the subject. Talk about Abramoff. Talk about Katrina. Do not admit you know what the words mean. Tell jokes about Cheney with a shot gun. Anything but tax progressivity. If the American people start thinking about tax progressivity, your candidate will finish fifth after Patrick Buchanan, Ralph Nader and Lyndon Larouche. Don't go there. Ever.

update: Thanks for links

Mark Thoma
Ezra Klein
Brad DeLong

The health food store was selling some very natural food. It was sweetened with "dehydrated cane juice". Which must be better for you than sugar.


Anonymous said...

April 17, 2007

Managers Use Hedge Funds as Big I.R.A.'s

Many Americans squirrel away as much as they can into retirement investment accounts like 401(k)s and I.R.A.'s that allow them to compound their earnings tax free. The accounts also reduce what they owe when tax day rolls around. For the average person, however, the government strictly limits the contributions to about $20,000 a year.

And then there are people who work at hedge funds.

A lot of the hedge fund managers earning the astronomical paychecks making headlines these days are able to postpone paying taxes on much of that income for 10 years or more.

The key to the hedge fund tax boon is that many managers of these lightly regulated private pools of capital have the ability to earn the bulk of their compensation offshore and invest it in their funds where it grows tax-free.

"If you could compound your compensation tax-free, why wouldn't you?" asked Stewart Massey, founding partner of Massey & Quick, a consulting firm.

Few people know the power of compounding better than hedge fund managers. Consider the following calculation done by Financial Engines, a financial advisory and portfolio management firm: A hedge fund manager makes $10 million in fees and defers it for five years, earning a return of 10 percent a year. When he pays taxes at the end, he walks away with $10.5 million. Another manager who makes the same $10 million pays his taxes immediately. He still earns 10 percent on what's left, but over the same period he accumulates just $8.9 million.

Elevate the comparison to $130 million, the minimum take-home pay needed to make it on Alpha magazine's list of the 25 highest-paid hedge fund managers: the first manager receives $136.1 million; the second $115.8 million.

This closely guarded arrangement is completely legal; similar, but less generous deferrals have been commonly used by corporate executives for years. But thanks to the peculiarities of the structure of hedge funds and their enormous growth, the tax-deferred sums that hedge fund managers earn may be far outpacing even the compensation of the most well-paid corporate chieftains.

One of the flagship funds at Citadel, a $13.5 billion hedge fund, for example, has deferred at least $1.7 billion since it was founded at the end of 1990. And that does not count what might have been taken out already. Citadel declined to comment.

"We pile advantage on advantage for these managers and there doesn't seem to be any economically logical basis for it," said John C. Bogle, founder of the Vanguard Group. "It's a very well gilded lily to allow these tax deferrals." ...


Anonymous said...

April 17, 2007

Tax Credit Seen as Helping More Parents

More than one in six taxpayers in 2004 received the Earned Income Tax Credit, highlighting its growing role in bolstering the incomes of struggling low-income parents, according to a new report.

The federal credit, which offers tax refunds this year of up to $4,716 for a parent with two children who makes $12,000 to $15,000, has emerged as one of the largest aid programs for the working poor. The amount of the credit for such parents gradually declines, reaching zero as their incomes hit $38,000.

Annual federal payments under the program total nearly $40 billion, compared with $25 billion for the revamped welfare program, and all tax-credit money goes directly to the recipients.

But childless adults and noncustodial fathers receive little from the earned income credit; their maximum benefit this year will be $428 and begins phasing out at an annual income of $7,000....


Anonymous said...

April 18, 2007

Bill to Let Medicare Negotiate Drug Prices Is Blocked

Republicans in the Senate framed the issue as a choice between government-run health care and a benefit managed by the private sector....


Anonymous said...

There is then competition and competition, and Republicans are determined that there be only the appearance of competition, which is evidently to be preferred, especially in health care, preferred to the real thing, which would be a government-drug company balance.