Tumblr Icon RSS Icon

Top 25 Hedge Fund Managers Make As Much As 440,000 Middle-Class Americans, But Still Get Tax Loophole

By Pat Garofalo on April 1, 2011 at 2:28 pm

"Top 25 Hedge Fund Managers Make As Much As 440,000 Middle-Class Americans, But Still Get Tax Loophole"

Share:

google plus icon

According to the latest statistics, CEO pay last year rose by 27 percent, while worker pay rose by just 2 percent. The median corporate CEO made $9 million last year, pushing CEO pay nearly back to its pre-recession level. But even CEO pay pales in comparison to that of hedge fund managers:

Last year was very lucrative for some of the biggest and best-performing hedge funds’ chiefs. Wealth was so concentrated that a mere 25 people pocketed a total of $22.07 billion, according to this year’s annual ranking by AR Magazine, which tracks the hedge fund industry. At $50,000 a year, it would take the salaries of 441,400 Americans to match that sum.

Making matters worse, hedge fund managers benefit from preferential tax treatment that middle-income Americans don’t. Due to what’s known as the carried-interest loophole, the income that hedge fund managers receive if their funds make money is treated as capital gains — rather than ordinary income — and gets taxed at the capital gains rate of 15 percent. Even though the pay is performance-based compensation (just like any other performance-based bonus made by any other worker), hedge fund managers receive a tax break on that income.

This results in hedge fund managers paying less in taxes on this income than middle-class workers, who are subject to a 25 percent top marginal tax rate:

Congress has debated closing this particular loophole over and over, but has never actually followed through. At a time when vital and popular programs are being placed on the altar of deficit reduction, removing this tax break for some of the richest people in the country seems prudent.

‹ PREVIOUS
Long-Term Unemployment Ticks Back Up, But Several States Are Moving To Cut Unemployment Benefits

NEXT ›
Bipartisan Deficit Peacocks Decry Deficit, Then Call For Repeal Of The Estate Tax

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.