Today’s Young Mega-Millionaires Just Want to Have Fun

This Bank of America Study of Wealthy Americans surveyed 1,000 deep-pocketed adults of all ages and found that 73 percent of those not yet 44 years old consider themselves “skeptical” of any investment strategy that has them investing only in traditional stocks and bonds.

The wealthy who took part in the new Bank of America survey are all sitting on at least $3 million in investable assets. The younger ones among them turn out to have less than half their investable millions invested in traditional stocks and bonds. Their older counterparts have three-quarters of their investable assets in these classic categories.

The younger rich, the Bank of America study goes on to show, have almost a third of their fortunes in crypto currencies and other alternative investments like classic cars. The older rich have just 6 percent of their wealth sitting in these alternate asset classes.

But both the younger and older rich do share one intense investment fixation: Both age cohorts want to pay as little as possible in taxes on the income their investments — in whatever category — end up creating.

Under current federal tax law, profits from the buying and selling of assets, traditional and alternative alike, face a significantly lower tax rate than paycheck income. The top combined federal tax rate on ordinary paycheck income now runs 40.8 percent. But income from capital gains — the income from buying and selling assets — only faces a top 23.8 percent overall tax rate.

Private equity fund managers have an even lusher loophole — the so-called “carried interest tax deduction” — they will go to any lobbying lengths to forever preserve. This loophole, note analysts at Americans for Financial Reform, “allows private equity and hedge fund executives — some of the richest people in the world — to substantially lower the amount they pay in taxes.”

The loophole lets these fund execs “claim large parts” of their compensation for services rendered “as investment gains.” Ending this carried interest loophole could raise billions in new revenue.

To make sure that this ending doesn’t happen, private equity and hedge fund execs spent $547 million on political campaign contributions in the 2020 presidential election year cycle.

In the current cycle, just 11 private equity billionaires all by themselves have so far pumped over $223 million in contributions to congressional and presidential candidates, an amount that more than doubles, notes the Center for Media and Democracy, what moguls from 147 private equity firms plowed into political campaigns back in the 2016 election cycle.

In other words, billionaire and billionaire-wannabe fund execs are shelling out much more than ever before on candidates they’re counting on to keep our tax code rich people-friendly. For America’s richest, no big deal. They can easily afford these gargantuan political campaign outlays. And they also consider these outlays money exceedingly well spent.

Takes money, as the rich like to say, to make money. The American way! We need to change it. One place to start: passing the pending Carried Interest Fairness Act, legislation that U.S. Senator Sherrod Brown of Ohio has introduced to eliminate the tax loophole that only “wealthy money managers on Wall Street” could love.