In his August 7 column, written as a fictional conversation with his deceased grandfather, Washington Post columnist Richard Cohen reported that while Sen. Hillary Rodham Clinton (D-NY) supports changing the tax law so that compensation received by hedge fund managers based on the gains their funds realize will no longer be taxed at the capital gains rate, she will avoid the issue on the campaign trail. In the fictional dialogue, Cohen's grandfather says of Clinton's opposition to the current tax law: "She's not going to campaign on that. She'll let this Chuck character [Sen. Charles E. Schumer (D-NY)] take the heat, and she'll do nothing." In fact, Clinton has campaigned on this issue. In a July 13 speech in Keene, New Hampshire, she called for changing the law and described the current system of taxing hedge fund compensation as a "glaring inequity."
According to a July 13 press release on her remarks at the Keene rally, Clinton said that the current system -- in which the share of managers' compensation pegged to the performance of their fund, called "carried interest," is taxed at the lower capital gains rate, not the higher income tax rate -- "offends our values as a nation." From the release, titled "Hillary Clinton Proposes Ending Unfair Tax Breaks for Wall Street Investment Managers":
Hillary Clinton today announced her support for cracking down on the tax loophole that allows some Wall Street investment managers to pay dramatically lower tax rates on their income than those paid by average working Americans. Current tax laws allow investment managers in certain partnerships to take large amounts of their compensation in the form of "carried interest," which is taxed at the low 15% capital gains rate, rather than at income tax rates as high as 35%. Many finance and tax experts, including billionaire financier Warren Buffett, have raised concerns that carried interest is essentially earned income. Therefore, it should be taxed as ordinary income, just like the earnings of average American workers.
Hillary's economic vision focuses on shared prosperity in the face of rising economic inequality in our country. A key element of her economic agenda is tax fairness that rewards work, not just wealth. Speaking at a rally in Keene, New Hampshire, on her Ready for Change, Ready to Lead tour, Clinton said that the preferential tax treatment of carried interest presents a "glaring inequity" that must be addressed to restore fairness to our nation's tax system.
"Our tax code should be valuing hard work and helping middle class and working families get ahead," Clinton said. "It offends our values as a nation when an investment manager making $50 million can pay a lower tax rate on her earned income than a teacher making $50,000 pays on her income. As President I will reform our tax code to ensure that the carried interest earned by some multi-millionaire Wall Street managers is recognized for what it is: ordinary income that should be taxed at ordinary income tax rates."
Clinton's speech was widely reported. In a July 13 article on the rally, The New York Times wrote that Clinton "today became the latest presidential candidate" to call for ending the practice of taxing "carried interest" at the capital gains tax rate. A July 14 Associated Press article similarly reported that Clinton "joined other Democratic hopefuls in supporting the end of a tax break for some wealthy Wall Street financiers that she argued creates 'a glaring inequity.' " Clinton's remarks were also reported on the July 13 edition of NBC's Nightly News and the July 14 edition of NBC's Today.
From Cohen's August 7 Washington Post column:
"What do I mean? What do I mean? Listen, college boy, in my day, the Democrats stood for the little man. You know the little man, boychik?"
"He's the working stiff. He's the guy with a lunch pail. You think it's right he pays a higher rate of taxes than those hedge-fund managers?"
"Oh, Grandpa, you're talking about something called the 'Carry.' It stands for carried interest, and it means that these money managers and hedge-fund guys, wonderful risk-takers and builders of wonderful wealth, get taxed as if their income is capital gains -- 15 percent. The IRS says it's legal."
"Legal, shmegal! You think it's fair?"
"Yeah, fair. You heard of fair, Mr. Famous Columnist?"
"This is not a matter of fairness, Grandpa. Believe me, there are vast issues of macroeconomics and tax policy here, which, if not handled properly, will sink the economy."
"Who are you?" my grandfather bellowed. "The poor pay more than the rich, and you give me this macaroni economics stuff. You should be ashamed of yourself." He paused.
"You know this Schumer?"
"Chuck? The senator? Yeah."
"He's opposed to this tax fairness. What kind of Democrat is this?"
"You have to understand," I explained, "Schumer represents Wall Street."
"What about Main Street?"
"Hillary supports your view."
"You think I was born yesterday? She's not going to campaign on that. She'll let this Chuck character take the heat, and she'll do nothing."
"Do you have two sources for that?"
"Oh, wake up! Don't you know nothing about bosses and workers and who controls politicians? Too much college made your brain soft." He paused again.