They might have a notoriously thin grasp on their demand list. They might totally miss the irony of wearing $150 Ray Ban sunglasses while carrying signs denigrating “corporatism” and “consumerism.” Some of their members may, in fact, see the protest as nothing more than a way to exhibit their least attractive qualities, including but not limited to anti-Semitism. Heck, they’re pretty sure even they don’t know what they’re doing (aside from asking America to pretty, pretty PLEASE bail them out of the student loans they racked up in four years studying foreign film at the New School).
But they may have a long-term effect on your pocketbook and the financial stability of the nation if any of the concrete items on their rambling, incoherent list of demands makes it to the level of national governance. Although the protesters themselves might be a loose collection of Communists, socialists, card-carrying ANSWER members, SEIU stooges, English department mainstays and professional grievance-mongers, some of the “big names” pulling the strings behind the scenes and influencing #occupywallstreet with New York Times editorials are suggesting that the “occupiers'” attempt to influence Washington movement on some key issues contained in the jobs bill.
Specifically, the progressive thinkers want their unwashed hippie army pushing D.C. to ram through a provision called “Carried Interest” which they define as “punishing the rich” but which is more closely defined as “destabilizing the American real estate and investment markets.” From the #OccupyWallStreet “Manifesto”:
2. Currently, the 1% takes bailouts from taxpayers with impunity, and continues to give executives exorbitant bonuses…
Close the “carried interest” and “founders’ stock” loopholes, which allow our wealthiest citizens to pay very low tax rates by pretending that their labor compensation is a capital gain.
Citing a Nicholas D. Kristoff NYT piece from July (and a fawning piece on the protests from October 1, where Kristoff gushingly compares #OccupyWallStreet to populist revolutions in countries with actual oppression and not perceived oppression as its discussed in countless college classrooms), citing “carried interest” as being an “intellectually vacuous” maneuver that allows hedge fund managers to see their income taxed at capital gains rates rather than the “more fair” graduated income tax rate. Hyperbolically tying carried interest to disastrous economic consequences for America on par with the Islamic fundamentalist terrorist threat (and salaries of hedge fund managers he presents no evidence come exclusively from carried interest), Kristoff maintains (with the help of a law – not economics – professor from the University of Boulder) that such a “tax loophole” allows the “rich and powerful to get away with murder.”
Nice. Not exaggerated at all.
In reality, carried interest is a lot more complex than merely a “tax loophole” that allows bankers to commit homicide without fear of societal retribution. When investors form a partnership to represent a group of people looking to put money into things like commercial real estate or stock (one type of which could be a hedge fund, but that’s not an automatic classification), their earnings become very difficult to classify for stock purposes. Typically, these partnerships are managed by a small group of people, and that’s who carried interest directly affects. The small group gets some compensation (just for managing the partnership’s money), but they also receive a cut of the profits when their investments pay off (usually around 20%). That 20% is taxed at a capital gains rate, not simply because this small group is looking to make tons of cash on the backs of hardworking Americans but because sometimes investments go sour.
By taxing profits over a longer period of time, the government allows investors to recover a bit from losses by keeping more of the money they earn when an investment pays off. It also protects major investors from being hit by the tax man when they see profits from an investment early on but suffer dire losses from an investment quickly after. By spreading out wins and losses, it spreads out the paperwork, and gives investors who suffer big wins and losses in the same year some way to balance things out over the long run.
The carried interest loophole, quite basically, keeps investors investing. It takes the sting out of big wins and losses, especially now when big wins and losses are routine in the market, and gives a greater incentive for those who are currently holding on to money – a primary complaint of #occupywallstreet – to put those solid assets into things that will more greatly benefit communities like start-ups and commercial and large-scale residential property development. Basically, it’s very possible that, should this loophole close, investment partnership managers would be even less likely to spread their wealth around, not more likely.
Granted, #occupywallstreet has a solution to that – taking bankers’ money by force and pouring it into “ecological maintenance projects” but clearly, just from this passage, you can see they’re not exceptionally forward thinking.
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