Hedge fund managers currently enjoy the law that generally taxes their earnings and performance fees at the lower 15 percent capital gains rate, rather than the 35 percent bracket they would be in if their profits were considered ordinary income. There are arguments on both sides but whats not up for debate is how much money stands to be collected if the Buffett Rule passes.
Last year top 40 hedge fund managers made a combined $13 billion before taxes (see the full list here). Billionaires Ray Dalio, James Simons, and Carl Icahn were the top performers; just the three of them took in over $7 billion last year.
Assuming these high-earners took advantage of the current carried-interest rules, that $13 billion they made between them was theoretically taxed at about 15 percent, which added up to just under $2 billion in taxes they paid to the federal government.
But what if the Buffett Rule were in effect last year, doubling their effective tax rate? That could take an additional $2 billion directly from the pockets of these 40 highest-earning managers, dropping their take-home pay closer to (only) $9 billion between them. Dalio, Simons, and Icahn might have had to give up approximately $450 million, $315 million, and $300 million, respectively. Read how much top hedge fund manager made here.
Again, this is only a rough estimate. Tax rates vary substantially from person to person, and there are a number of other factors at play. Depending on how they treat their investments and apply other conditions, hedge funders can have an effective tax rate significantly higher or lower than 15 percent. Therefore, $2 billion might be the maximum additional amount the 40 managers would have surrendered last year if the Buffet Rule were in place. To take a look at Buffet office click here
Read more: Forbes