Squeezing the Hedges

Recent legislation known as pay-as-you-go or paygo requires that new spending produced by the US federal government be funded by new and equal income. Radical idea, I know, but if Congressional members need help getting their heads around it they could talk to, well, any average tax payer out there that learned how to do this a long time ago. In the abstract this is a nice idea; it’s time we teach the jerks some responsibility. But we still get that pork that our Rep promised us, right?

But the IRS officials have more immediate concerns with this new paygo structure. They know that the government will turn to them for the extra money. Caught between the Bush tax cuts and this new rule, coming up with the money is going to be a challenge.

One source of extra funding may be private equity and hedge funds. Watchdog groups and anyone with common sense have long suspected that there is a lot of untaxed money moving through the complicated machinations of off-shore accounts, under-the-table loans, and unreported income that appears to be common in these monetary devices. The IRS plans to do some in depth studies of these funds in search of new taxable sources. And no doubt the hedge fund managers are scrambling to defend their carefully arranged financial empires.

Smithers, release the lawyers!