The Income Rich Take One For The Team. Thanks!

Re:The Income Rich Take One For The Team. Thanks! by tomp on Wednesday January 02, 2013 @03:43AM (#4995844)

So, wait - I understand how this might be an incentive so that Arrington's investors invest more capital - they pay low taxes on any gains the fund produces. But, why is also Arrington himself, as the fund manager, paying non-income tax, even though all the money he makes is his proper income, and not money produced by his capital investments (as he has no capital invested)?

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Re:The Income Rich Take One For The Team. Thanks! by chatmasta on Wednesday January 02, 2013 @03:58AM (#4995872)

Sorry, I meant to address this question in my original post. You make a valid point. This is not Arrington's money, so why is he being rewarded for investing it? Shouldn't the investors themselves be the ones rewarded?

The answer I see to this is that Arrington is rewarded because he is making the investments on behalf of the investors. I would hazard a guess that many of the people investing in Arrington's fund made their money outside of tech, and therefore do not possess the skill set to critically analyze tech investments. But they know the technology sector is a good place to invest, so they hand their money to someone with the proper skill set to invest in it. In this case, that person is Arrington.

He is rewarded because were it not for him, the people investing in his fund would be unable to intelligently invest in the tech sector.

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Re:The Income Rich Take One For The Team. Thanks! by tomp on Wednesday January 02, 2013 @04:13AM (#4995906)

But you could make the same statement for everybody - if it were not for the ordinary workers, capital would have no meaning. So why not give incentives to workers as well by giving them a low interest rate?

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Re:The Income Rich Take One For The Team. Thanks! by prostoalex on Wednesday January 02, 2013 @05:37AM (#4996084)

I must say this is a pretty weak argument. However honorable the activity is, he's still a hired gun.

Another question you have to ask - if his income was subject to income tax versus a LTCG tax that's currently in place, would he stop doing what he does? Reading his original post, most likely not. Maybe he'd raise a larger fund next time to justify the 2/20 fee structure, maybe the structure will be changed to 5/20, but investors will still chase the yield, and there will be someone on the receiving end happy to accept investors' money.

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Re:The Income Rich Take One For The Team. Thanks! by jdotjdot on Wednesday January 02, 2013 @08:01AM (#4996405)

What you just described - - someone doing skilled work on behalf of others who might not know how to do it - - is called "hiring someone", and in every other sector is accompanied by the regular income tax.

Remember, carried interest is different than capital gains, which would suit your argument better.

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