[FoRK] Re: Limeys can't comprehend US tax law? ;-)

[Jeff Bone]

On Apr 24, 2008, at 6:04 PM, Jeff Bone wrote:

> On Apr 24, 2008, at 5:26 PM, Rob Harley wrote:
>
>> I'll stay on-list thanks and quote:
>>
>> "Partnership profits are taxed not to the partnership; instead
>> partners are taxed
>> on allocations of partnership income, and the nature of that income  
>> (capital or
>> ordinary) "flows-through" to the partners.  As a result, the  
>> investment
>> managers are able to have income for performance of services taxed  
>> at the 15%
>> capital gains rate."
>
> As somebody who just last week wrote an absolutely sickening check  
> to the IRS based on a K-1 encompassing precisely this sort if not  
> order-magnitude of economic activity, let me just say DUH.  The  
> above is all true up to the part that implies that all that flow- 
> through is taxed at the lower rate.  For long term gains, it's taxed  
> at the long term rate;  for short term gains, it's taxed at the  
> maximum rate for your tax bracket (assuming your ordinary income, if  
> any, maxes out the lower tiers.  Which in any case those guys  
> divvying up that $29B pie, did without question.)  And as previously  
> stated, it's a near-certainty that most of that income for most of  
> those investment managers --- the prophetic Buffet notwithstanding  
> --- stemmed from trades with tenor less than the magical threshold  
> of 1 year and a day.  You can argue about whether ANY of that should  
> be taxed at the lowest rate, but that's a policy argument;  as a  
> matter of practice very little of that flow-through for anybody in  
> this type of situation gets taxed at that preferential rate.

I neglected to mention in the above post, though I did mention it  
previously, that ALL gains derived from short positions on securities  
(currency excepted, not a security, every currency position has a long  
and short component) is taxed at the short term rate, regardless of  
the length of time the short position was held.  And I guaran-fucking- 
damn-tee you that a disproportionate amount of the $29B we're  
bickering about was derived from domestic security shorts that the  
managers in question let ride, baby, ride!  And hence resulted in a  
short term cap gains liability for all those folks on a  
disproportionate amount of their income --- or, put differently, was  
taxed just the same as if it were ordinary income, even such ordinary  
income as earned by the much-maligned Jane the Secretary (indeed,  
certainly higher than Jane's own top marginal rate.)

So this whole discussion is nothing but an anomaly wrapped in a lie,  
dipped in confusion and misunderstanding and then sprinkled with  
"screw the rich."

jb