Cato

CATO….You know, I keep hearing that unlike, say, the Heritage Foundation, the folks at Cato are relatively honest. They’ve got their ideology just like the rest of us, but they aren’t dishonest shills willing to torture the facts any old way that’s convenient. The Social Security debate made me pretty skeptical of this notion (remember the Cato Calculator?), and stuff like this pretty much nails the coffin shut:

Politicians are circling around hedge funds like vultures. They want to raise taxes on hedge funds, maybe by treating their capital gains as normal income. Why? Because hedge funds are mysterious — do you know what they really do? — and they have a lot of money. Make billion-dollar profits, get headlines, attract taxers — it’s as certain as ants at a picnic.

That’s flatly untrue. Nobody wants to treat the capital gains of hedge funds as normal income. What a lot of us would like to do is treat the normal income of hedge fund managers as normal income.

If you invest your own money and earn a return, that’s capital gains. If you manage other people’s money and take a cut of the profits, that’s management. Only in a looking glass world would these management fees have ever been treated as capital gains in the first place, and it’s hardly mysterious that Democrats want to close this absurd loophole. After all, we believe in treating the normal income of the rich the same as the normal income of the rest of us. If Cato believes otherwise, I’d like to hear why.

Washington Monthly - Donate today and your gift will be doubled!

Support Nonprofit Journalism

If you enjoyed this article, consider making a donation to help us produce more like it. The Washington Monthly was founded in 1969 to tell the stories of how government really works—and how to make it work better. Fifty years later, the need for incisive analysis and new, progressive policy ideas is clearer than ever. As a nonprofit, we rely on support from readers like you.

Yes, I’ll make a donation