Monday, July 02, 2007

Cohen: Tax authories out of touch

"People accept that Bill Gates made a ton of money because he has a real product," Becker said. "When somebody makes it from a hedge fund, it's harder for people, including myself, to accept. But as an economist I have to say, O.K., these guys are managing a lot of capital, and if they get some of the value they create, that is what the market is telling us."

Where Becker balks, and I balk too, is at the fact that in the United States, fabulous wealth creation has been unmatched by improved education. Teaching that will get you recognized in a globalized world is denied minority kids in failing schools.

"The proportion of American children not completing high school - around 25 percent - has scarcely changed in recent decades. Hedge-fundocrats and their private equity cousins should consider ways to pile money into ending this national failure.

Where I also balk is at tax treatment that allows many of the ultra-rich to pay 15 percent capital gains tax in the United States on much of their earnings, rather than the top income tax rate of 35 percent, and the global ultra-rich buying up London to sidestep many taxes, including stamp duty.

Tax authorities in the United States and Britain resemble dinosaurs pursuing space ships. They have lost touch with the super-rich, as has most of humanity.

Peter Mandelson, the EU Trade Commissioner, once gave Americans this clue to Britain's New Labour: "We are intensely relaxed about people getting filthy rich."

He did add, however, that the filthy rich should pay their taxes. That would be a start, some consolation for upper-losers, workers and the rest."

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