Odd choice of picture in Greenwich Time

Voting "present"

The gentleman pictured on today’s online version of Greenwich Time is Greenwich resident and jogger Richard Blumenthal, currently serving as one of Connecticut’s United States Senators. That’s fine – what better way to start one’s morning than by reflecting on the merits of our town’s slickest, most ambitious politician, but the headline reads, “Connecticut lawmakers blocking tax break”. The issue is the capital gains treatment of so-called “carried interest” for hedge funds and you can take your choice whether you think that’s a good idea or not, but the article itself says that neither Blumenthal nor Lieberman has taken a position on the subject. So why illustrate the article with a mug shot of Blumenthal?

I have no idea of the motive for this, I just find it curious.


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18 responses to “Odd choice of picture in Greenwich Time

  1. Cobra

    Perhaps there was a mention of Vietnam veterans or captains of the Yale swim team?

  2. Libertarian Advocate

    …. or maybe its that today’s JORNOLISTAS are lazy ass dipturds who are too hung-over to work?

  3. Georgie

    As they say, all politics is local…..so the paper shows Bloomy despite his lack of guts or convinction to reveal his position.

    I gotta love the other story with our local finance folks falling all over themselves to adda boy themselves that their borrowing of $56 million for a $30+ million Performance Center was at such a low interest rate….

    Hey, lets borrow more and more for ALL of our champagne wishes and caviar dreams….and yes—continue to tax and tax….its practically Free Money after all.


  4. Anonymous

    Again, this is a Federal not state tax issue. CT doesn’t distinguish between ordinary income and capital gains. One rate for all. Our senators should have a point of view, but it really hasn’t any impact on the state.

  5. Balzac

    Carried interest is baffling to the media, but it’s simple. Fund managers typically are paid a base fee of 2% of assets: this is taxed as salary, at the high rates. In addition, as an incentive, they can receive 20% of the gains, if any. If the fund invests in things which are not capital assets (pork bellies and metals are not) then the gains on those, if any, are taxed at high rates too. If the fund invests in capital assets (stocks) and if there are gains, then the fund is taxed at capital gains rates for the 80% and the managers get the same treatment on the 20% (carried interest). The nitwits like Jimbo seem to think that one gain should have different taxation on the 80% portion owned by some pension fund than on the 20% portion of the very same gain, allocated to some manager. The media omits to mention a) that managers pay high ordinary income rates on the 2% which is like salary, and b) sometimes there are no gains, so the 20%, like any portfolio, can show no income and no tax advantage. The carried interest low rate is not a sure thing. We’ll be hearing more of this debate as Mitt Romney’s candidacy advances.

  6. Anonymous 2

    this tax is a function of partnership tax law and would apply not only to private equity and hedge funds but real estate partnerships, energy partnerships and even business structured as partnerships with third part capital–

  7. AJ

    Blumenthal vs. McMahon was a classic example of Tweedledee or Tweedledum — choose and lose. Sort of like being offered a menu where you have a choice of feces or excrement for dinner. I met him back when he was state AG; he put out a vibe of extreme arrogance that you could smell from at least a mile away. But as a “battle hardened combat vet” you could hardly expect him to give his position away.

  8. Anonymous

    The key word is “paid”, Balzac. The carried interest that hedge fund managers receive is compensation…for their work. It is not income derived from investing their own money. It is income derived from investing other peoples money, which is what they do for a living. Therefore, it should be taxed like everyone else’s earned income. Bad news for Greenwich, but common sense. A typical self employed person pays close to 50% on their first $100,000 of income when you include FICA tax. Why should a hedge fund manager pay 15% on his earnings?

  9. pulled up in OG

    The collector of the 20% portion is NOT the investor. No different than a salesman collecting a percentage of sales for income.

  10. Inagua

    Balzac – You point out that the carried interest 15% tax rate is not a sure thing, but you fail to note that there is no risk of loss because the manager has no skin in the game. The capital gains tax rate should be reserved for direct investors who take risks with their own money, not money managers who invest other people’s money and take a percentage performance fee. Carried interest lets some of the highest earning people pay some of the lowest tax rates because politicians like campaign contributions more than they want tax reform.

  11. Cos Cobber

    Balzac has interesting points, but at the end of the day, we’d all be better off if we made no distinction on the source of income. Income should be income. My problem with the democrats campaign against capital gains is that they are singleing out hedge funds alone as the bad guy when all finance today is structured this way. For instance, I doubt when Tom Hanks takes a 20% interest in one of his movies he’s treating it as ordinary income – but rather its structured as a capital gain for ‘investing in movie x.’

    By the way, the 2% base pay probably is feeds a base pay of 400k -subject to full income taxes and the balance run through a partnership to avoid employment taxes and to take advantage of certain business deductions.

  12. AJ

    Anonymous @ 11:36, you’re so right. As a person who was self employed for most of my life with a few stints at some major corporations whenever being on my own got a little hard, I know what you’re talking about. Many years I could have went out and paid cash for a new car with what I had to hand over to the government, so I decided to read every tax law book I could get my hands on and make myself a tax expert. What I found out is that if you work for a living you’re pretty much screwed. Historically serfs have revolted when they had to hand over more than ten percent to their lord. What the hell is wrong with Americans, citizens of the “freest” country in the world? I think it’s time to elect Ron Paul and take a very close look at the Federal Reserve.

  13. Inagua

    “… we’d all be better off if we made no distinction on the source of income…”

    That is how Reagan left the tax code, and the top rate was 28%.

  14. Balzac

    Thoughtful comments all. Larger point about the difference between cap. gains tax at 15% and ordinary income tax at 35%: much research has shown that a tax cut on ordinary income rates does indeed reduce the government’s revenue, an expected result. But the research (Art Laffer) shows clearly that a cut in capital gains tax rates unleashes so much capital-gain realization that that particular tax cut more than pays for itself, almost immediately. So, if punishing the rich is your goal, you’ll adopt the Dem policy of raising cap. gains tax rates. By doing so, the government’s revenue will shrink. An irresponsible policy but one which class warriors embrace.

  15. Inagua

    Balzac – Cap gains are a tiny part of total government revenue:

    “Individual income tax receipts from capital gains realizations normally make up about 4 percent to 7 percent of individual income tax revenues (see Table 1); they are usually between 2 percent and 3 percent of total receipts.” Source: CBO

    It’s a big political issue only because it is important to so many high income people. As a revenue source, it is almost a rounding error.

  16. Seriously?????

    Someone above says that PE folks ” have no skin in the game”. now there is someone who is babbling about which they no nothing. i work for a pe firm, and i have had the priviledge of having negative cash flow last year taking my post tax income less the amount of money i am REQUIRED to put into every single investment.

    Sounds just like an executive at GE who is required to buy over 100% of his post tax monet in GE.

    one more point for anyone willing to actually think about this issue – Should the artist who decided to take facebook stock for his “mural” get taxed at long term capital gains rate or at the highest marginal rate??? hummmm, sounds like he is getting paid for services rendered.

  17. Inagua

    >>Someone above says that PE folks ” have no skin in the game”. <<

    No, I did not say that. The thread dealt the tax treatment of "carried interest," which by definition is not direct investment or "skin in the game."