Don't ask me what a hedge fund is — if I knew, I'd manage
one.
I’ve already told you
the story of Mrs. Campbell, my well-meaning high school guidance counselor. In
case you missed it, I’ll tell you again.
High school seniors in
Detroit, where I grew up, had career counseling before they were turned loose
on society. You took “aptitude” tests (“Would you prefer arranging flowers or building
a bridge?”) and read boring brochures in the name of finding out what you
wanted to be when you grew up. I took the tests and read the brochures. When I
went to see Mrs. Campbell for advice, she had my records spread out in front of
her.
“I think you can be
just about anything you want to be,” she said. That was counselor-speak for:
“You don’t have any identifiable talent.”
She reviewed the traditional professions — medicine, law, engineering, dentistry. She started on trades — machinist, carpenter, plumber, mechanic — but they seemed even more problematic.
Finally, she gathered
my records into a neat pile, handed them to me and said “I’m sure you’ll think
of something.”
That’s how I wound up
in journalism.
If only she’d
mentioned the job I’ve since realized would have been a perfect fit for me —
hedge fund manager.
I say this based on
what hedge fund managers get paid.
David Tepper of
Appaloosa, The New York Times reports, made $2.2 billion last year.
That’s what I said, folks — two billion bucks. $2,200,000,000. Poor Ray Dalio
of Bridgewater trailed him by a half billion and cried all the way to his tax
shelter.
Pay for the top 25
earners in the hedge fund business amounted to $14.14 billion last year. That
may sound just swell, as we used to say back in high school, but it was the
lowest level recorded in the past four years.
That’s my kind of
racket. If I made that kind of money, I’d hire Mitt Romney to cut my lawn.
Wait, you say. Those
guys made all that money because they’re smart. They must know things the rest
of us don’t.
Actually, they’re not
so smart. Most hedge funds — and don’t ask me what a hedge fund is, for if I
knew I’d manage one — didn’t outperform the market last year. That means you could have
done better putting your own cash into an index fund.
Returns for Dalio’s
fund fell short of market yields, as did those for Steven A. Cohen’s SAC
Capital Advisors. Both titans still made out as if they’d outsmarted the
markets. Cohen took home $1.4 billion.
What do you call it
when you get paid a lot when you’re successful and get richly rewarded when you
fail? Capitalism.
I’m OK with that. I
say let them make as much money as their greed requires — then tax the hell out
of them to get a little back for society.
The 60 percent of us
who belong to the middle
class are shelling out
22-30 percent of our income to various governments when we pay taxes. I’ll
guarantee you that none of these guys pay anything near that.
Take the payroll tax,
for example. The bottom 80 percent of earners pay
7.65 percent of their income in FICA taxes. But the hedge fund managers listed above
don’t pay standard payroll taxes on any of their income over the first
measly $113,000 in income officially designated as wages. And a perk known as
the “carried interest” provision ensures that most of their income from doing
whatever it is that they do is taxed at the capital gains rate — which is
about half the rate applied to the income of other professions.
These are the people
our Republicans in Congress are shielding from tax increases while seeking to
cut Social Security, Medicare, and Medicaid. And yes, Congress did agree on
a new 3.8 percent tax on investment income as part of the
Affordable Care Act. But no, it’s not likely to increase the tax
burden on gazillionaires.
Is this a great
country or what?
Mrs. Campbell, you
were my guidance counselor. You shoulda guided me a little better. I coulda
been somebody; I coulda been a contender.
I coulda been a hedge
fund manager.
OtherWords columnist Donald Kaul lives in Ann
Arbor, Michigan. OtherWords.org