Carried Interest: Shoe Salespeople Earn Capital Gains

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Monday, 04 March 2013 23:38

It's extremely unfair that shoe salespeople have to pay taxes on their income at the same rate as other workers. After all, they must work with shoe buyers, achieve an alignment of interest, and then get them to buy the shoes. Clearly this means that they should be taxed at the lower capital gains rate rather than the ordinary earnings rate that factory workers and school teachers pay.

Yes, this is nuts, but because very rich people run pension and hedge funds, the NYT feels the need to treat this stuff seriously. Therefore it gave Steve Judge, the chief executive of the Private Equity Growth Capital Council the opportunity to say that shoes salespeople shouldn't have to be taxed at the same rate as everyone else. (Sorry, I meant rich equity and hedge fund managers.)

This one does not come close to passing the laugh test. The point here is very simple. When you get paid for work, whether you are school teacher, a shoe salesperson, or a hedge fund manager, this is earned income and should be taxed as such.

If hedge and private equity fund managers want to invest in their funds they are free to do so and can have their subsequent income taxed at the lower capital gains rate. This is really simple -- even a hedge fund or private equity fund manager should be able to understand this. It is not a complicated issue no matter how much people may get paid to make it complicated.

 

Note: Typo corrected, thanks Tom.