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Risk-Takers a Plump Target for the Tax Man


[A longtime contributor to Rick’s Picks thinks the IRS is about to come down hard on hedge funds and other trading entities that appear to be flourishing in these economic hard times. Read  Larry Amernick’s  editorial below to understand why the idea is likely to be a political winner. RA]  

As act one of the pandemic crisis winds down, the curtain on the second act is about to go up. The President will slowly lift the shelter-at-home order, and an experiment in a new, post-isolation world will begin. We do not know if it is too early to allow social behavior. Nassim Taleb, author of the best-selling The Black Swan, argues for a prolonged isolation period. However, we cannot allow the economy to lie dormant for a long time. Already, 22 million Americans have lost their jobs. With the government throwing trillions of dollars from helicopters, it is time to start asking, what is next?

Immediate winners are online purveyors like Amazon and Netflix, whose business models are a correct fit for the current environment. Hedge funds and other investment pools are additional winners. These entities arrived early to drink from the public trough and received large sums of money from the Small Business Administration’s Paycheck Protection Program. At the same time, residents of the exclusive Fisher Island were known to all receive Corona Virus tests.

An Angry Public

This information is not lost on Main Street, and eventually there will be hell to pay as an angry public sees the inequities in the distribution of both medical tests and government handouts.

The unprecedented amount of public liquidity will end up inflating asset markets, adding to the growing disparity between the “capital” class and the rest of the nation. This conflict illuminates economist Thomas Piketty’s concerns about the inequality of the distribution and accumulation of capital in Capital in the Twenty-First Century. The book was published in 2014 and is still popular today in leftist circles.

Piketty, voted the best young economist in France in 2002, argues that the disparity between the capital and labor classes have become critical and offers a solution in an international tax on capital. No American president is ever likely to adopt that position. However, a series of progressive taxes is probably coming down the pike. Assets and capital are likely to be the victims of such taxes.

Bipartisan Support

Higher selective taxes on hedge funds and specific companies may delay hyperinflation as excess funds are shuffled back into the government coffers. Why tax capital? The public, longing for the good old days, will cry out for it.  Capital will make a plump target for the taxman as the government experiences a severe shrinkage in revenues from payroll and sales taxes.

Traders should prepare themselves for a transaction tax and the end of certain hedge-fund advantages. Since this is an election year, both Republicans and Democrats are likely to support these measures as well as other new ways to tax risk-taking.

The trading community will not want to hear this, but please don’t shoot the messenger. Remember, the casino of the marketplace is one of the only remaining robust businesses out there functioning. The politicians are watching and waiting.

Please do not ask trading questions!

Leave a Comment

  • John Jay April 27, 2020, 12:55 am

    Well, I am not certain, but perhaps they would just move their operations to say Puerto Rico or Panama where their tax burden would be much lighter?

    I think billionaire hedge fund guys will always come out on top, one way or another.

    The IRS has already admitted going after the uber wealthy is too much work, easier to jack up Ma and Pa Kettle,
    cause Just Plain Folks are easy pickens for the Agent Smith types!


    Now, if America goes cashless and everything goes through debit cards, that would be the end of the Underground Economy, and who knows how big that really is?

    If they do that, then all the folks working for cash suddenly appear on the IRS radar screen, and even little Sally’s lemonade stand had just better let her Uncle Sam “Wet my beak” or else!

    Easy Pickens for Agent Smith!

    “The best thing about being me, there’s so many me’s!”




    It had never occurred to me that Agent Smith was intended to signify the IRS. Do you think so?

    • John Jay April 27, 2020, 12:52 pm

      To me, Agent Smith represents any Government Enforcer, whose job is to crush anyone who sees through the illusion of the Matrix and poses a threat to the status quo.

      The “So many me’s” can be the low level TSA guy doing an “Enhanced Security Screening”, or the power mad DMV clerk, or motorcycle cop.
      And the Agent Smiths go right on up to the FBI, CIA, NSA, IRS, all of them self perpetuating endlessly, growing ever more controlling all the time.

      At the IRS level, my favorite Agent Smith story was some poor Ma and Pa Kettle flower importing business
      that got savaged by US Customs over some minor paperwork error on some orchids they imported from South America. Cost them mountains of stress and 100 k to settle the case.
      Ma and Pa Kettle are always a favorite of the Agent Smiths, the IRS Agent Smiths even come right out and admit it!


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