Bloomberg- James Simons, the highest-paid hedge-fund manager in the U.S. last year, could pay enough in Medicare taxes to provide health insurance for about 4,800 senior citizens.
Such estimates are being cited by backers of a proposal in the U.S. House of Representatives to raise taxes on hedge-fund and private-equity managers. Simons, the Renaissance Technologies Inc. chairman, earned $1.7 billion last year, according to Institutional Investor’s Alpha magazine; his income is largely exempt from Medicare and other payroll taxes because it is considered a capital gain.
The House measure, sponsored by Representative Sander Levin, a Michigan Democrat, would require those earnings to be classified as compensation and subject them to the 2.9 percent Medicare tax. He and other lawmakers are using the image of billionaires avoiding Medicare payments to win support for requiring fund managers to pay taxes at rates as high as 35 percent instead of the 15 percent capital-gains rate.
“Tax equity is really the basic issue here,” said Levin. “Those who pay 15 percent don’t pay Medicare when those who pay the higher tax do.”
The change, which would raise as much as $1 billion annually and cover the cost of insuring about 98,000 people, would provide a small boost for Medicare, which is projected to exhaust its assets by 2019 as the U.S. population ages and health-care costs rise faster than inflation.
