Big Government Grover Norquist
Political activist Grover Norquist has been one of the right-wing’s most forceful voices over the last two decades. Along with Newt Gingrich, he was one of the main architects of the Republican takeover of Congress in 1994. His track record makes him a powerful voice on the right. His name sparks fear in the hearts of many on the left.
One of Norquist’s current causes is the protection of the tax subsidy enjoyed by the managers of hedge funds and private equity funds. While people with middle class jobs, like teachers and firefighters, typically pay a 25 percent tax rate, and higher paid professionals like doctors and lawyers pay a 35 percent rate, fund managers are taxed at just a 15 percent rate on their earnings.
This special deal is the result of the fund manager tax break which applies a lower tax rate on compensation earned by the people who manage hedge funds and private equity funds than on other wage income.
As a result, these fund managers, many of whom earn more than $100 million a year, and some who earn more than $1 billion a year, pay a lower tax rate than a school teacher earning $50,000 a year. It is important to realize that this lower tax rate is applied to the money they earn as a manager. The tax code already applies a lower 15 percent tax rate to investment income, including investment income from money that fund managers actually invest in their funds.
Norquist is concerned because many members of Congress now want to tax fund managers like teachers and firefighters, subjecting them to the same tax code. Apparently, being subject to the same tax rates as ordinary workers will make life really tough for these fund managers.
Many people no doubt share Norquist’s sympathy for the plight of fund managers. The cost of living is soaring for fund managers. A proper vacation home can easily run into the tens of millions of dollars, as does a decent sized home in the Hamptons. The price of yachts and private jets keeps getting higher as do luxury boxes at major sporting events. And an elite private nursery school – a necessity for getting children on the right track in life – can run $40,000 a year. That’s almost two hours of work for many fund managers.
While the situation of fund managers may be dire, we have to ask ourselves whether subsidizing them is really the proper role for government. Those people who sympathize with the hard times facing fund managers can always contribute to charities that help them make ends meet. They can even hold bake sales and walkathons, involving the whole community in voluntary fundraising efforts to assist the fund managers.
However well-meaning Norquist and his colleagues might be in their desire to help fund managers, this is not the place for government. The government should not be raising the taxes of school teachers and firefighters to subsidize fund managers.
The size of the subsidies that Norquist wants for his fund manager friends is truly astounding. The special tax break for a fund manager earning $1 billion is worth $200 million, enough to provide health care insurance for more than 60,000 kids.
What is really so special about the fund manager tax break is that it exposes the rightwing as what it is, not a principled movement for small government, but rather a cabal that aims to use the power of government to shift as much wealth and income as possible to those at the top. Grover Norquist has been quoted as saying that he wants to shrink government down to the size where he can drown it in a bathtub. When it comes to those portions of the government that function to redistribute income from the poor and middle class to those at the top, this sounds like a very good idea.













Why is it no surprise that Norquist favors a subsidy for various classes of Wall Street sharks? If Norquist had been born a hundred and forty-five years ago he'd be selling snake oil from behind a mule or following the Union armies making fortune selling the troops supplies at inflated prices and fleecing conquered southerners out of their possessions at the point of a taxpayer funded bayonet.
The man is a good example of what ethical parents do not want their children to grow up to be.
July 23, 2007 9:30 AM | Reply | Permalink
double clutch deleted
July 23, 2007 9:40 AM | Reply | Permalink
It's hard to see much justification for taxing the direct performance-contingent income of hedge fund managers (they themselves have little capital at risk) at other than ordinary income rates. And that, apparently, is what H.R. 2834 does.
But S. 1624 seems to be a whole 'nother kettle of fish.
What does the Senate bill do, and what's the justification for changing the tax code in this area of taxation?
July 23, 2007 10:16 AM | Reply | Permalink
I'm surprised Norquist hasn't been charged with anything yet. The St. Petersburg Times reported last year that the Islamic Institute, an outreach group Norquist co-founded, received $35,000 in donations in 1999 from activist Abdurahman Alamoudi. Alamoudi was sentenced to 23 years in prison this year for his involvement in a plot to assassinate Saudi Crown Prince Abdullah.
Norquist was also Jack Abramoff's a**hle buddy and co conspirator in the Indian Casino scandal. Ol Grover was getting $25,000 for every Indian Casino transaction he laundered for Abramoff.
I wonder also why he isn't in the news more often for his nefarious deeds.
July 23, 2007 10:22 AM | Reply | Permalink
My personal favorite Norquist moment was when he likened taxation to the Holocaust on NPR's Fresh Air. Terry Gross, the host, was so astounded that she made him repeat the assertion and then asked him if he really thought that taxation was like genocide. Grover was certain that the Holocaust was no worse than taxation.
When Starbucks gets his soy latte, half sugar, half Equal, it's like killing children. And God help us if the dry cleaner over starches his shirts: Black Plague.
/c
In the blogosphere every one is an expert, so no one is an expert.
July 23, 2007 11:14 AM | Reply | Permalink
I know this is essentially ad hominem, but isn't Norquist the guy who has a portrait of Josef Stalin hanging either in his home or office?
To me he's sort of the "Brown Eminence" of the Right.
-Dave Adams-
July 23, 2007 1:18 PM | Reply | Permalink
Come on, now, it's basic economics. If people in high paying jobs pay so much in taxes that they can only buy two jet skis instead of four, they'll just stop going to work. It won't be worth it to them. They'd rather not have any money if they can't have all the money.
Adam Smith said so.
I am, of course, not being serious.
thosethingswesay.blogspot.com
July 23, 2007 1:39 PM | Reply | Permalink
One of the big unions was looking into whether Grover Norquist illegally funneled $800K from the National Association of Manufacturers (NAM) to the National Alliance for Worker and Employer Rights (NAWER).
According to the Americans For Tax Reform 990s, the $800k took the form of two grants, $600k in 2004 and $200k in 2005. Almost all of the other ATR grants are less than $100k.
July 23, 2007 3:05 PM | Reply | Permalink
Nelly,
Grover is getting to be a really good money launderer.
July 23, 2007 3:51 PM | Reply | Permalink
Idea for a novel.
"Atlas, Eh"
by Destor 23
The world's hedge fund managers go on strike and a restaurant in Greenwich, Ct. is forced to stop charging $400 for truffle-infused entres. The global economy is effected in myriad ways, none of which will be documented but which will be mentioned many times on the Op-Ed pages of the Wall Street Journal. Soon, spring turns to summer and summer to autumn. Other things go on, as usual.
thosethingswesay.blogspot.com
July 23, 2007 5:05 PM | Reply | Permalink
Grover chose his constituency and his cause for the same reason that Willie Sutton robbed banks--because that's where the money is...
I look forward to the day of his perp walk.
July 23, 2007 7:42 PM | Reply | Permalink
I propose referring to him as Grover from now on, just to avoid raising prejudice against Swedes. On second thought, that would just shift to prejudice against Grovers, who have enough trouble as it is.
Perhaps this is the solution...do like we do with bullsh*t. Nobody seems to be developing a prejudice against the asterisk. So from now on let's just call him Gr*v*r N*rq*&st. He needs a vowel movement, and he's made an asterisk out of himself anyhow.
aMike
July 23, 2007 10:27 PM | Reply | Permalink
Agreed. Just "Grover" is unfair to Grovers.
Ever since Elmo came on the scene, Grovers have been given short shrift.
/c
In the blogosphere every one is an expert, so no one is an expert.
July 24, 2007 6:01 AM | Reply | Permalink
I kinda wondered why Grover doesn't take this to its logical conclusion. The most obvious example would be the treatment of income of plaintiff's personal injury lawyers working on a contingency fee. After all, they invest a great deal of time (and often resources) in a fairly high risk venture (i.e., the majority of such cases that fully go to trial end up in defendant's verdicts).
Now if Grover added this heretofore unappreciated constituency to his entrepenurial coalition, he'd be in business!
July 24, 2007 7:20 AM | Reply | Permalink
Grover has given the Republican party lots of great ideas over the years which they have used to stir up a feeding frenzy of tax cuts and deficit spending.
Now, as the Republicans have taken his ideas and implemented them over the past six years, a wonderful thing has happened.
Soon the Republican party will be small enough to drown in a bathtub.
dc
July 24, 2007 7:54 AM | Reply | Permalink
Grover Norquist is like a whore, a liar, a charlatan, and a miscreant. He seems to be willing do or say anything for money--for anyone--but he means none of it, like the commonest street walker hooker whistling from the edge of a dark alley. He appears to have no values other than getting over, and no principles other than taking money from anybody with a two dollar bill sticking out of their hot little fist. The public should know this about Grover. His record of whoredom is all in the public domain. They used to tar and feather scoundrels like him.
"If you talk about it, even the simplest thing becomes complex and incomprehensible." -Herman Hesse
July 24, 2007 10:02 AM | Reply | Permalink
As I discuss here, the truly libertarian long-term solution would be to decrease spending so that schoolteachers and firefighters can be as free as fund managers presently are. But meanwhile, given that there's a certain tax burden to be shared, we should certainly share it more equitably.
Econ 101 would suggest that present tax policy is inefficient by inducing more people to become fund managers than a free market would accommodate.
July 24, 2007 1:27 PM | Reply | Permalink
Would that same Econ 101 course suggest that the present wealth distribution is inefficient and induce more people to become Power Ball lottery winners at a rate greater than a free market would accommodate?
My econ 101 course included skills and knowledge as economic levers. Right or wrong, real or bluff, hedge fund managers get the premium because of who and what they know.
They pay folks like Norquist to lobby congress for some perks because they can afford to. It's like they're a union unto themselves. What Norquist has figured out is that the best lobbying approach is to bully and threaten Republicans, or face the wrath of the conservatives he marshals.
In the meanstwhile, the unions representing more than one hedge fund manager, i.e. teachers, truck drivers, steel workers, services, etc., are weakening.
I learned in philosophy 101 that pure, unaudulterated capitalism, is illogical since the end result, all capital in the hands on one man/woman, would make said capital worthless. It was a theoretical discussion then, and a more practical discussion now.
/c
In the blogosphere every one is an expert, so no one is an expert.
July 24, 2007 2:29 PM | Reply | Permalink
While it certainly appears that the current structure is unfair (I'd have to know more about the tax code regarding hedge funds to make a definite conclusion), it is Orwellian to declare, as the title of this piece does, that lower taxes is "big government," with the corollary that raising taxes on hedge fund managers would be "smaller government."
"You say I'm a dreamer. We're two of a kind. Looking for some perfect world that we both know that we'll never find." - Thompson Twins, "Hold Me Now"
July 24, 2007 3:20 PM | Reply | Permalink
The fact that Norquist still has influence on the debate leads to the question; Are ther any true believer conservatives left in power? Norquist is so transparent a whore I don't see how anyone with a shred of integrity could stomach having a conversation with him, much less doing his bidding. The only reason to do so is because you are getting a cut.
As for this particular debate, I have long agreed with our republican brethren about the capital gains tax; it should be cut. In fact it should be abolished. Call it what it is for most people who use it; INCOME!
Now we will hear about the poor store owner who worked all his life for the one payoff when he sells his business. I have no problem with giving a break to the people for whom that is true, but there are other ways to do that. We could let them hide the big payout in an account and pay straight income on it only as they use it. We could set up a once or twice a lifetime exemption.
But the sad truth is this tax break for the rich is used every year by the same people and has become nothing more than a special preferred tax rate on unearned income.
Then the mouthpieces of the rich will try to scare the average middle class taxpayer with a cry of,"It's a new tax on investments! YOU have investments! Tell Congress to stop this!" They won't tell the plebians that they don't get this break on 401K's and IRA's. Every dollar that comes out of those widespread investments is taxed as straight income. You don't avoid it, you merely defer it. If you've been smart enough that your retirement income is higher than your working income you might even lose money on the deal if you get bumped into a higher bracket.
The whole thing makes me sick. It's just a bunch of the uberstinkingrich trying to avoid paying for the government that protects their privilege. Hey, if you hate taxes that much, go live out in the woods and suck acorns.
July 24, 2007 4:52 PM | Reply | Permalink
Well, you can certainly question the free market outcome on all sorts of philosophical grounds, but that's sort of beside my point. My point is, purely on economic grounds, there's probably no salient reason to reward fund managers over and above other similarly-compensated people in the economy.
The present tax policy could well be immoral too (I certainly think so), but at best it's economically inefficient because it distorts decisions to pursue one form of work over another for no real reason.
July 24, 2007 5:35 PM | Reply | Permalink
Exactly, that's why I'm so adamant that the truly libertarian solution is to cut spending so that you can give the schoolteacher the same economic freedom as the fund manager.
It's probably fair to call the act of subsidizing one profession over another a sort of "big government", but it's not hard to think of "solutions" that would fix the subsidy without makeing the government any smaller, e.g. raising everyone's taxes to 80% including fund managers'.
July 24, 2007 5:44 PM | Reply | Permalink
Are ther any true believer conservatives left in power?
Well, Ron Paul can probably still run for his Congressional seat after getting run out of the GOP primary, but I don't think one Congressman constitutes "in power" really. :-)
July 24, 2007 5:46 PM | Reply | Permalink
I wonder what happens to currency when all the Grovers in the world get it all -- then there's like none left to run the systems that generate profits, like blood pooling in one foot. I don't see how currency means a damned thing if it's not circulating throughout the entire economic body.
Further, I believe it is humans that give value to currency, not the reverse. The world that the Grover-cons envision can't be fit for human beings.
Maybe they're aliens.
July 25, 2007 2:05 AM | Reply | Permalink
How do school teachers, most of whom are employed by public school systems, and thereby paid for via taxation, fit into the Libertarian world?
Don't get me wrong, tax breaks for fund managers are repugnant, but the Libertarian perspective would probably provide greater benefits to this same group: lower or no taxes, no market oversight, and less recourse for fraud and unethical behaviour. Seems like a plan geared to our lesser angels.
/c
In the blogosphere every one is an expert, so no one is an expert.
July 25, 2007 4:37 AM | Reply | Permalink
July 25, 2007 8:41 AM | Reply | Permalink
I'm going to corner the market on anti-acids and make a fortune. Thanks for giving me the tip. I'll share the bounty with you. :-)
aMike
July 25, 2007 10:15 PM | Reply | Permalink