"Free Market" Gems from The New Republic (LC)

[bills217]

This from a piece arguing (well, if you can call it that) for more hedge fund regulations:

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Of course, the best argument for repealing this break is that it distorts the economy — in this case, by encouraging people to become fund managers rather than, say, entrepreneurs.

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Yeah. It'd be much easier if the gov't just set a quota at the correct # of fund managers and entrepreneurs.

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quite apart from distributional justice, the break on capital gains interferes with the free market by encouraging investments that people might not otherwise undertake

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Hear that one? Taxes are too LOW for the free market to work properly! We have got it all wrong!

Link

[bobman0330]

Closing "loopholes" like this is how the tax code got so ugly in the first place. The way hedge funds make money is basically the definition of capital gains: buying and selling property held for investment.

The part where they call it restoring sanity to the tax code is especially lol.

EDIT: Meh, this isn't exactly right either. Under the general principles of the current tax system, a hedge fund manager's annual 20% commission should indeed be CG, but he should also pay a one-time whammy tax on the value of his 20% interest at ordinary income rates. But this leads to a bunch of practical problems: how do you value the interest, who's going to become a hedge fund manager if they owe a couple hundred million in taxes the day they start their fund, etc.