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February 17, 2012 at 07:32 AM
Vanguard Group founder John Bogle spoke with Bloomberg Television‘s Betty Liu Thursday at the Bloomberg Link Portfolio Manager Mash-Up conference in New York.
As usual, Bogle had plenty to say, noting that lower tax rates for certain types of gains earned by private equity firms are “ridiculous” and “I’m arguing for the capital gains rate taxable as ordinary income.”
Often at odds with the modern fund industry he helped create, Bogle’s comments run counter to vehement opposition from investment managers and trade organizations over raising taxes on dividends and capital gains from the current 15% rate to the average 35% ordinary income tax rate. The issue is expected to be increasingly prominent as the country heads into election season later this year.
Bogle has been a vocal critic in recent years of what he sees as Wall Street greed, a failure to put clients first with a fiduciary standard and a lack of due diligence in new product development. At the John C. Bogle Legacy Forum, held in New York in late January in his honor, Bogle said “the silence of the fund [managers] remains deafening” when it comes to not only keeping fund costs and turnover low and not attempting to time the market, but in putting investors first. He also said there was a “crying need for a fiduciary standard” in the industry.
Bogle on the private equity industry:
“I wouldn’t confuse [Blackstone Group’s] Steve Schwarzman with an indexer. He may own a diversified list of stocks but it’s not going to look anything like the index. And then of course, you deduct the monumental, outrageous fees, on which they pay very low taxes.… Ridiculous.”
“Look, I would think most people in this room would say that there should be no tax rate that is lower than the earned income tax rate that people earn by the sweat of their brow or the burrows of their brain. That should be the regular tax rate. I think that there are a lot of good arguments out there for having a higher tax rate on capital gains, in particular short-term capital gains…. What is the explanation for the tax break for gambling?”
“I am arguing for a capital gains rate taxed at ordinary income. I’m also arguing for a premium tax and maybe even a transaction tax that will slow down trading.… Why would you give a lower tax rate to other than the people working every day than you to on people who are, to a large extent, gambling on Wall Street?”
On higher taxes for the wealthy:
“There’s something that I don’t like about “soak the rich.” I say, equalize the sources of income, but given the income distribution, or maldistribution, in this country, you are doing the same thing. I think it’s a better platform to consider where the income comes from and how it’s earned and we’ll tax everybody at least equality … I would also put in because there are a lot of people, the lower 99%, who own investments in the hope of building a retirement plan. I would say, just for the fun of it, top of head, maybe give them the first $10,000 or $25,000 of capital gains and dividends tax free. Is that soaking the rich or helping the poor to accumulate retirement? They happen to be the opposite sites of the same coin.”
On which presidential candidate has the best tax policy:
