To The Editor:
A blatantly incorrect and large headline for a letter to the editor on Jan. 5 (“It Happened on Obama’s Watch”) requires a response:
The National Bureau of Economic Research offers on its website a list of every peak and trough in business cycles since 1857. Its Business Cycle Dating Committee determined in September 2010 that the last major recession began in December 2007 and ended in June 2009, that is five months after Obama was inaugurated. The G.W. Bush administration should accept the responsibility for this recession, which was the most severe one since 1945.
Another statement in this letter about “redistributing the wealth by confiscating money from those at the top” shows that the writer is not familiar with the tax advantages given to some very wealthy citizens. Most of the income of those who manage hedge funds, private equity funds, venture capitalist funds, and real estate funds gets taxed at a very low income tax rate of 15 percent.
An article in The New York Times by Nicholas Kristof dated July 6, 2011, states that “John Paulson, a New York hedge fund manager, made $4.9 billion (not million!) in 2010.”
Another article titled “Tax Breaks for Billionaires” posted July 24, 2007, on the website of the Economic Policy Institute states, “The top 25 hedge fund managers earned $14.25 billion, on average $570 million each, in 2006 ... 70 percent of this income (70 percent of $570 million amounts to $399 million each) is taxed at the low tax rate of 15 percent.” The unfairness of this tax structure becomes clearer after pointing out that the compensation for similar work of fund managers for pension funds, trusts, and endowments is treated as ordinary income that gets taxed on the common and graduated scale with income of more than $379,000 for a single person or a married couple filing jointly taxed at 35 percent.
If John Paulson would have had to pay 35 percent taxes on money beyond the first $379,000, he would have paid $1,679,867,350 ($1.679 billion) in taxes. Instead he paid 15 percent on 70 percent of his income which is $504 million in taxes and 35 percent taxes on 30 percent of his income above the first $370,000 which comes to $503,870,500. Added together this amounts to $1,007,870,500. That is a tax savings of $671,996,850 for him in just one year.
This is obviously an oversimplification, but the reader might get my point.
The top 25 hedge fund managers, including John Paulson, earned $14.25 billion together. Wouldn’t it be fair to start eliminating such a slanted tax structure when our country does not have enough money to pay its bills? I don’t call such a reform redistributing — or confiscating — money from those at the top.