I happen to agree with Congresswoman Pelosi on this point. There should be no compromise when it comes to programs, aka "entitlements," that help the poor, the disabled, our military veterans, and the elderly. Shame on those politicians who are targeting these programs, especially when the wealthiest Americans are enjoying lower tax rates, and big oil companies and other multinational corporations earning billions of American dollars while outsourcing American jobs, receive federal subsidies and/or pay little or no taxes. And shame on those politicians who are not defending these programs.
On top of this, billionaire hedge fund managers are legally able to claim most of their profits as "capital gains," therefore paying capital gains tax rates. Although this has just been in the news in the past few days, the hedge fund issue actually went public in the mid-2000's. Simply put, hedge fund managers basically use their hedge funds, which are much like private equity funds, to use/invest other people's money (OPM). The hedge fund manager basically acts as a risk consultant, much like a professional gambler who uses OPM to place bets in Las Vegas or at the track. The gambler, in this case, the hedge fund manager, gets a 2% management fee plus 20% "carry" interest which is considered to be capital gains under the law and taxed at around 15%. In 2010, the House of Representatives passed legislation to end these tax breaks for investment fund managers. Under strong pressure from lobbyists representing the investment industry, the bill died without being passed by the Senate before the mid-term elections. What's at issue here is the overall fairness of taxing hedge fund managers, many of them billionaires, at this rate, but not others who provide consulting services for a fee. If this tax rate is fair for a hedge fund manager, for example, shouldn't an attorney who wins a settlement for her client get her percentage of the settlement treated as capital gains? If a realtor sells a house for his client, shouldn't his commission be taxed as capital gains?
Another related issue is that if hedge fund managers were taxed like the rest of us, the federal government would receive an additional estimated 6 billion dollars in tax revenue. (Some estimates are even higher.) This is huge. If hedge fund managers were taxed like the rest of us, if wealthiest Americans had their tax rate rolled back to what it was in 1996, when the budget was balanced, if we stopped paying subsidies to big oil companies, and if tax loopholes were closed so that multinational corporations paid their fair share of taxes, we would be able to reduce the nation's deficit without touching programs like Social Security and Medicare.
Politicians who would rather target programs for the poor, disabled, elderly, and veterans than touch entitlements for the wealthy, claim that doing so would harm job creation. But giving these benefits to the rich have not helped job creation in the past, and they're not helping now. Critics also say that targeting benefits for the rich is basically waging a class war between the "haves" and the "have nots." They are forgetting that the U.S. hasn't had just these two classes since the end of World War II. Since that time, America has also had a middle class - what I like to call the "have enough" class. The middle class has enough to give themselves and their families a comfortable, good quality life; enough to take their family out to the movies or dinner or a ball game now and again; enough to send their kids to college; enough to save money for their retirement and older age. Social Security and Medicare help the middle class to do this. Without good government, and without good social programs such as these, the middle class will be lost, and so will the American Dream that has made this country so great.
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