Tuesday, April 02, 2013

Too Much Online, the free news weekly on excess and inequality, 02 April 2013

Two tales of jackpots and taxes. The first: A New Jersey grocery store employee has just won the fourth-largest Powerball lottery pool ever. The 44-year-old Pedro Quezada will take his cash as a lump sum, about $211 million. Taxes? He’ll owe 46.2 percent of his lump in combined state and federal income taxes.

Hedge fund manager John Paulson likes to bet, too. In 2009, he bet that the feds would bail out banking giant Citigroup. He bet right — and cleared $1 billion. Taxes? The profits hedgies make qualify as “capital gains” and get preferential treatment at tax time. Paulson paid only a 15 percent tax on his winnings.

The basic capital gains tax rate did go up a bit, from 15 to 20 percent, in the January fiscal cliff deal. But hedge fund managers who cash out big this year will still be paying taxes at half the rate of Pedro Quezada.

In this week’s Too Much, more on taxes today — and a little on taxes yesterday, back in the middle of the 20th century, a wondrous time when even Wall Street tax lawyers advocated and applauded stiff taxes on America’s super rich.

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