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June 09, 2010

Senate Dems Fight to Keep Taxes Low on Wall Street Millionaires

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With the strong anti-Wall Street mood in the country, it’s ludicrous that Senate Democrats are still behaving this way. They’ve lost their ability to shock me.

While running around screaming about deficits and refusing to provide aid to regular Americans through legislation like the Local Jobs for America Act, Senate Democrats have decided to protect the tax loophole for wealthy hedge-fund managers. The loophole lets them pay a lower tax rate than their secretaries and janitors. From McClatchy:

Currently, managers of these investment funds are compensated with a share of the fund’s profits, referred to as “carried interest.” This compensation is taxed as a capital gain, and the capital gains tax is now 15 percent.

Senators scaled back the House plan to tax as “ordinary income” some 75 percent of the fund-income these managers receive. Instead, the Senate would trim the tax hit to 65 percent, and 55 percent for assets held longer than seven years.

This move is going to cost the government $3 billion over the next decade. While pretending to care about the deficit and considering cutting Social Security, Senate Democrats are at the same time fighting to keep the taxes on Wall Street hedge-fund managers relatively low. If there is a worse political move Democrats could make now, it’s hard to imagine.

Senate Democrats are not making this change because of the possibility of a Republican filibuster. They should dare Republicans to vote against it and if need be, they should be prepared to use reconciliation as a last resort to close this tax loophole fully. This is something Senate Democrats have chosen to do, not something they were forced to do.

If anyone still doesn’t understand why so much anger is directed at Wall Street and Washington politicians, look no further. If Republicans manage to pick up a lot of seats in November, it won’t be because they defeated the Democrats. It will be a result of Democrats defeating themselves by pouring endless love on Wall Street and large corporations.

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