Indignant rich round on protest movement, the rich are fighting back in America’s new bout of class warfare.
Indignant rich round on protest movement
By Dan McCrum in New York,
In the face of popular fury, political invective and protest encampments on their doorsteps, the rich are fighting back in America’s new bout of class warfare.
Some of the high-profile rich, including Steve Schwarzman, John Paulson and Jamie Dimon, have sought to define the terms of a debate that will be central to next year’s presidential campaign.
Under threat are what Barack Obama has described as the lowest tax rates for the wealthy since the 1950s, while a tax break enjoyed by private equity bosses and hedge fund managers will come under close scrutiny should Mitt Romney, a former private equity executive, be his Republican opponent.
But like the disparate Occupy Wall Street movement, the rich employ a variety of tactics in their defence. One is to criticise the divisive tone of the debate itself as something that violates traditional American values. Leon Cooperman, a hedge fund manager and Goldman Sachs veteran, last month attacked the populist tactics of the president in an open letter widely circulated on Wall Street.
A billionaire who has joined Bill Gates and Warren Buffett in pledging to give away most of his wealth, Mr Cooperman is in favour of higher taxes and, unlike many of his peers, does not blame Mr Obama for economic woe.
Instead he wrote: “What I can justifiably hold you accountable for is your and your minions role in setting the tenor of the rancorous debate now roiling us that smacks of what so many have characterised as ‘class warfare’.”
Jamie Dimon, chief executive of JPMorgan Chase, has also questioned the demonisation of those who are successful. Stephen Schwarzman, a founder of private equity group Blackstone and a fundraiser for Mitt Romney’s campaign, has called for shared sacrifice, arguing that attacking the rich alone cannot solve America’s fiscal problems.
Mr Schwarzman built his fortune with the help of a tax break known as the carried interest exemption, which allows money managers to treat their share of client investment returns as capital gains, which are subject to a lower rate of tax than income.
“Just raising taxes on the wealthiest two per cent, for example, will not reduce a $1,300bn annual deficit enough to restore fiscal balance. For any future budget adjustments to be effective, we cannot exempt any group or special interest, except for the poor and disadvantaged”, he wrote in a comment piece for the Financial Times in September.
That only half of those who file a tax return pay any Federal taxes is also frequently heard in private, along with barbs directed at Warren Buffett, the billionaire investor who has lent his name to the campaign for higher taxes, saying “there has been class warfare going on for the last 20 years and my class has won”.
One hedge fund manager points out that Mr Buffett pays little tax because he very rarely sells anything, and so does not realise taxable gains on his vast investments. “Normal people sell things. His whole business strategy has been based on avoiding taxes, and when he dies it will all go to a foundation and he won’t have paid taxes on any of it,” said the aggrieved millionaire.
Others point to their contribution to the economy. In October, John Paulson, the hedge fund manager who made billions betting that large numbers of subprime borrowers would default on their mortgages, issued a statement claiming that his hedge fund Paulson & Co has created over 100 high-paying jobs in New York City since it was founded.
“The top one per cent of New Yorkers pay over 40 per cent of all income taxes, providing huge benefits to everyone in our city and state,” he said, concluding, “instead of vilifying our most successful businesses, we should be supporting them and encouraging them to remain in New York City and continue to grow.”
Invocation of the rags to riches tale of the American dream also features heavily. Mr Cooperman is the son of a plumber. Anthony Scaramucci, head of SkyBridge, a fund of hedge funds, traced his path from blue collar roots to Wall Street in his autobiography, Goodbye Gordon Gekko: how to find your fortune without losing your soul.
“The 99 per cent”, he says, “really want to be part of the 1 per cent”. |
