Private equity : The New Yorker.
Maybe not. Hedge fund managers get a massive tax break worth billions because of a tax loophole that allows them to pay only 15% on the great majority of their income. I know I pay a helluva lot higher rate, but then again I’m not a downtrodden hedge fund manager. Despite a fix being passed by the House three times in three years the Senate may not even take it up.Why would this happen when approval of the financial industry is ranked just above convicted pedophiles and lepers?
If we were starting from scratch, after all, it seems unlikely that the Senate would choose this particular moment to pass a bill subsidizing money managers to the tune of billions of dollars a year. But, because the tax break already exists, it exerts a kind of gravitational pull that makes it hard to get rid of. In part, that’s simple economics—those who benefit from the tax break have more money to lobby for it to be kept in place. Furthermore, while the cost of subsidies is spread out among all taxpayers, the benefits are highly concentrated, so, naturally, opposition is generally diluted and diffuse while support is intense. If you work in private equity, it’s possible that nothing the government does matters more than keeping this tax break intact. And this pattern is true not just of subsidies but of government programs in general: every government action creates a constituency with an interest in keeping that action going.
