Steven G. Blum

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Is There Really a Tax Loophole for Hedge Fund Managers?

April 21, 2015 By Steve

Almost two years ago, I wrote a piece entitled “Do We Really Need A Special Tax Break for Hedge Fund Managers?”   After briefly explaining how “carried interest” works, it argued that anyone less rich and powerful trying to pull of such a capital gains switcheroo would end up in jail. I took particular pleasure in the invention of an organization of rutabaga farmers reorganizing their work in an attempt to shoehorn it into this tax boondoggle.

Last week, in honor of Tax Day, Dean Baker took up this subject in an article entitled “Bonanza for the Super Rich: The Fund Managers’ Tax Break.”   In it, he describes the loophole as a “deduction which gives billions of dollars every year to some of the richest people in the country for no reason whatsoever.”

He has gotten that exactly right. And, by shining such a clear spotlight on the issue, has reminded us that the continued existence of this particular tax abomination should make us all feel ashamed. As a nation, a society, a people ruled by law rather than might – we can do better than that.

With that as background, may I propose a Tax Day resolution? Let us resolve to stay outraged until at least this, perhaps the most disgraceful tax giveaway in the entire Code, is finally eliminated.

Filed Under: Taxation

About Steve

Steven G. Blum has been teaching in the Department of Legal Studies and Business Ethics at the Wharton School of Business of the University of Pennsylvania since 1994.

In addition to teaching semester-long courses for undergraduate and MBA students, Mr. Blum has taught in Wharton Executive Education programs, lectured and consulted widely, and frequently leads seminars and educational forums. Mr. Blum has five times won the William G. Whitney Award for outstanding teaching.

He holds the degrees of Masters of Laws and Juris Doctor. He also earned a Masters Degree from the Harvard Graduate School of Education, and the Specialization in Negotiation and Dispute Resolution from the Program on Negotiation at Harvard. In addition to teaching and consulting, Steven maintains a practice of law and is a registered investment advisor. He has a strong research interest in the area of ethics and fiduciary duty. His book entitled Negotiating Your Investments was published by Wiley in April 2014.

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