Economy
Billionaire Hypocrisy: George Soros May Owe $7 Billion In Taxes
by Tyler Durden, Zero Hedge.com:
“You support President Obama’s proposal to increase taxes on the wealthy?” That was the question put to George Soros on CNN some three years ago. Here was his answer:
“Yes, very much… the super bubble really resulted in creating a great increase in inequality, and now we have the after effect where you have slow growth, but if you could have better distribution of income, then the average American would actually be better off.”
There’s no question that “everyday Americans” (as a reminder, those are the people Hillary Clinton wants to help by running for president… well, those people and perhaps a few foreign governments and any investment bank who is willing to pay her husband six figures for a speech) would be better off if they got a larger piece of the pie, but as we’ve seen over the past several months, that’s not likely to happen as wage growth declines for the 80% of American workers classified by the BLS as “non-supervisory” even as the country’s supervisors see their pay increase, and as Fed policy continues to inflate the assets most likely to be concentrated in the hands of the wealthy. As this sad reality continues to play itself outdestroying the American Middle Class in the process, we wondered if Soros was doing his best to ameliorate the situation by redistributing more of his vast wealth to the very same “average Americans” about which he expressed so much concern in 2012. The short answer: no.
Via Bloomberg:
George Soros likes to say the rich should pay more taxes. A substantial part of his wealth, though, comes from delaying them. While building a record as one of the world’s greatest investors, the 84-year-old billionaire used a loophole that allowed him to defer taxes on fees paid by clients and reinvest them in his fund, where they continued to grow tax-free. At the end of 2013, Soros—through Soros Fund Management—had amassed $13.3 billion through the use of deferrals, according to Irish regulatory filings by Soros…
Congress closed the loophole in 2008 and ordered hedge fund managers who used it to pay the accumulated taxes by 2017. A New York-based money manager such as Soros would be subject to a federal rate of 39.6 percent, combined state and city levies totaling 12 percent, and an additional 3.8 percent tax on investment income to pay for Obamacare, according to Andrew Needham, a tax partner at Cravath, Swaine & Moore. Applying those rates to Soros’s deferred income would create a tax bill of $6.7 billion…
When Soros founded his firm, nothing in U.S. law prevented money managers from postponing the acceptance of client fees and letting the money remain in their funds, where it could grow untaxed. But doing so wasn’t really an option for funds based in the U.S., because if managers didn’t take the fees, their clients wouldn’t be able to deduct them from their own taxable income.
Hedge fund managers could circumvent this obstacle by setting up parallel offshore funds for investors who weren’t subject to U.S. taxes and who therefore didn’t care whether their fund manager deferred taxes on the fees. That way, the fees—typically 2 percent of the amount invested and 20 percent of any profits—plus any investment gains, could grow without being taxed until the managers withdrew the money…
A manager with Soros’s track record who started with $12 million from investors, took 20 percent of the profits, and reinvested that money tax-free over 40 years, would end up with $15.9 billion. If that same manager paid federal, state, and local taxes on the fees and related investment gains before reinvesting them, the figure would shrink to $2.4 billion…
Here’s the simple math:
In the end, it would appear that we simply have yet another case of billionaire hypocrisy: “please raise taxes on all the uber-wealthy… except me.”
