There’re a lot of heated conversations going on in the investment world about tax reform. Many hedge fund managers don’t like the idea that tax reform is one of the topics that most presidential candidates are discussing. Ken Griffin, the founder and CEO of Citadel LLC, the Chicago-based hedge-fund investment firm, thinks hedge fund managers may be in end for a rude awakening in 2016 for a couple of reasons.
Ken Griffin is not a politician. Griffin is a billionaire that understands the internal facets of the United States government. Hedge fund managers like Mr. Griffin have close connections to the political world, and those connections say tax reform is coming, and it’s coming soon. How that reform will impact hedge fund managers is anybody’s guess at this point, but most investors think the current tax structure for hedge fund managers like Griffin will change. Investors may be taxed at a higher rate, and that will have a major impact on the economy, according to Griffin.
Mr. Griffin is an investor that has been through the trauma of losing everything and then getting it all back thanks to some risky, but smart investment strategies. When the market hit bottom in 2008 Griffin and his company were wiped out. All the assets that were under management at the time went south, and Griffin and his 18-year-old company were ready to call it quits. But Griffin changed his mind, and with the help of a few friends that invested Griffin decided to buy assets that looked like they would never recover from the 2008 mess. But those assets did recover and so did Griffin and his company.
Today, Citadel LLC is one of the largest hedge fund firms in the country. Griffin is a certified billionaire and an investment celebrity that has friends in high political places. Last year, Bill Clinton came to his 46th birthday party and spoke to the guests. Clinton was a paid speaker at the party, but he is also a friend of Mr. Griffin. Both men share some of the same thoughts when it comes to tax reform and other political issues.
The United States has one of the highest tax rates in the world, according to Griffin. That’s why many American corporations try to avoid paying taxes by registering in other countries that have lower tax rates. Hedge fund managers currently pay a little less than 24 percent in taxes, and if the current loophole is closed, they will pay 39 percent like other Americans. Griffin says if that tax loophole is closed the U.S. government would raise more than $20 billion in revenue over the next ten years, but if the rate for everyone is lowered including corporations and hedge fund managers, the government will earn even more.
Paying more taxes isn’t Griffin’s goal, but he does want the U.S. economy to grow. Rather than raising hedge fund manager’s tax rate, Griffin, and other investors say change the rate that all taxpayers pay. The United Kingdom tax rate is 20 percent. Canada and the Eurozone’s rate is around 26 percent. Hedge fund managers currently pay a little more than 23 percent. Griffin and other investors support tax reform if it is done fairly and benefits the growth of the economy.