Hedgies pay less taxes than you ?

Discussion in 'Taxes and Accounting' started by trade2live, Aug 5, 2010.

  1. I understand the taxation of carried interest in the US is only 15% which applies not just to the gains made by a manager on his own capital but on his share of the fund investors' profits (although strictly speaking this is a fee and thus no different than other professional income).

    On the other hand the individual trader in the US is paying cap gain tax at the income rate ! What kind of twisted system is that ? Is it just because you don't have any friends in Washington ?
  2. LEAPup


    HF's are set up as pass through entities.
  3. Just trade futures and other Section 1256 contracts and get 60 long/ 40 short tax treatment.

    Or start your own hedge fund.
  4. heech


    You're completely wrong.

    Carried interest just means the hedge fund management company fees are taxed based on the characteristic of the underlying income. So, if a hedge fund is doing intra-day day-trading like the individual trader you're comparing them to... the management company will still be taxed "income tax" rates. There's no difference between a hedge fund manager and individual trader.

    On the other hand, if an individual trader holds an investment more than 12 months, they're taxed at the 15% rate. If carried interest was repealed, fees going to hedge fund asset managers would be taxed as income regardless of how long they had held the investment.
  5. gobar


    buffet pays only 15 % tax while his assistant pays 30 to 35 %.

    i say increase tax on every stock, longer term or short term to 40%.

    dividend 40%. risky assets 40 to 50 %.

    take money from wall street and give tax breaks to small and mid size employers..
  6. combining the corp tax on profits of about 40% with a 40% individual tax rate, the government will be taking 64% of dividend earnings. Who needs socialism?
  7. Ofcourse. The intelligent always pay less than the poor and stupid.
  8. +1