The Solution To The Senate's Report On Hedge Funds Tax Dodging Billions

There’s a new report out from the US Senate’s Permanent Subcommittee on Investigations (that’s Senators Carl Levin and John McCain and friends to the rest of us) pointing out that a couple of banks designed products that enabled a couple of hedge funds to dodge a few billions in taxes due on trades. The essential point being made is that the use of “basket options” enabled the hedge funds to claim that the profits they made should be taxed as long term capital gains even while the actual holdings they were profiting on might have lasted only a few seconds. And thus, in a simple view of the world, those profits should have been taxed at the higher, short term, capital gains tax rate. The difference between those two being the tax that was being dodged.