The UK Guardian tells us that
The world’s top 25 hedge fund managers earned $13bn last year – more than the entire economies of Namibia, the Bahamas or Nicaragua.And last year was a bad year for hedge funds! What miraculous skills those 25 men (no women in the top 25 list) must have to be worth more than whole countries! And what on earth can you do with so much money? Buy political influence?
Hedge fund managers are indeed blessed. In the US they even get to pay income tax at a lower rate:
Many hedge funds are structured to take advantage of carried interest. Under this structure, a fund is treated as a partnership. The founders and fund managers are the general partners, while the investors are the limited partners. The founders also own the management company that runs the hedge fund. The managers earn the 20% performance fee of the carried interest as the general partner of the fund.
Hedge fund managers are compensated with this carried interest; their income from the fund is taxed as a return on investments as opposed to a salary or compensation for services rendered. The incentive fee is taxed at the long-term capital gains rate of 20% as opposed to ordinary income tax rates, where the top rate is 39.6%. This represents significant tax savings for hedge fund managers.It also represents a significant hole in the government's tax revenue, compared to what those revenues would be if ordinary income tax rates were used, and that hole is patched up by taxing others more and/or by slashing various government projects.
This is wrong.
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But donating money to this blog is not wrong!