I just finished reading Kevin Phillips’ latest book, Bad Money, which focuses on the causes of the economic turmoil that America is struggling through these days. Phillips, for those who have not read him, is the rare writer who has a firm grasp of history and is also able to pull themes together and see larger currents running beneath events.
Published earlier in 2008, it unfortunately leaves off in about August 2007, leaving one thirsting for his sparkling insight applied to more recent events such as the twin bailouts of the banking and auto industries and the stock market plunge of a few weeks ago.
In any case, thinking about the bank bailout, I thought I would reproduce a quote he gives from former Labor Secretary Robert Reich:
“You might think that Democrats would do something about the anomaly in the tax code that treats the earnings of private equity and hedge fund managers as capital gains rather than ordinary income, and thereby taxes them at 15 percent – lower than the tax rate faced by many middle-class Americans. But Senate Democrats recently backed off a proposal to do just that. Why? It turns out that Dems are getting more campaign contributions these days from hedge fund and private equity partners than Republicans are getting. They don’t want to bite the hands that feed.”
Phillips further notes that political contributions by employees of the top ten U.S investment firms during the second quarter of 2007 were about 50% higher to Dems, with Obama the leading recipient over Hillary Clinton, who placed second among democrats.
Kind of makes you think about how the bank bailout sailed through Congress much more smoothly than has the auto bailout, doesn’t it? It also makes you think about how a ruckus has been raised in the media about auto workers receiving union wages and health benefits, while nary a peep has been made about the enormous earnings of bankers and the low tax rate they enjoy.
Here’s a novel idea: let’s have the bankers pay for their own bailout by taxing derivative and other types of trades and subjecting them to at least the same tax rate as working folks, as well a supplemental Bailout Repayment Tax to help restore billions to government coffers.
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I’ve been active in taxations for longer then I care to admit, both on the personal side (all my employed life history!!) and from a legal standpoint since satisfying the bar and following tax law. I’ve provided a lot of advice and redressed a lot of wrongs, and I must say that what you’ve posted makes utter sense. Please persist in the good work – the more people know the better they’ll be outfitted to cope with the tax man, and that’s what it’s all about.