Originally Posted by listopencil
The loophole itself? I think it exists to control the flow of wealth. Like I said, the system is broken.
No, this one exists because some highly paid lawyers figured out another way to dance on the knife's edge of legality. Hedge funders have been warned about this possibly not being legal and now that everyone is piling into it, we'll probably see the IRS go after that.
Also, (not just replying to this post) the wealthy have the lowest tax rates ever. Our system isn't punitive. It's riddled with holes after decades of tinkering. No wealthy people are in danger of paying anywhere close to half their income in tax. This loophole is also converting what should be income for the hedge fund managers int capital gains thus lowering their tax burden even more. This is tax evasion.
A dramatic simplification while retaining a progressive structure is what our tax system needs. We don't need a flat tax that allows the wealthy to pull even farther away from everyone else.