Hedge-fund managers' pay hit a new record in 2010, magnifying a tax-cut racket accurately described as legalized theft. Led by John Paulson at $4.9 billion, the top 25 managers pocketed $22 billion. Their ludicrous tax loophole cost other taxpayers $4 billion for just those few managers. Overall it probably cost $20 billion.

Here's how this racket works. Unlike doctors, architects, engineers, accountants and other professionals who pay at the top 35-percent rate on their fees, hedge-fund managers exploit a loophole that grants them a 15 percent capital gains rate. With his $40,000-per-minute pay, Paulson makes 40,000 times as much as his secretary (if he pays her $120,000). But she is taxed at a top rate nearly double what her boss is.

With huge campaign contributions, hedge-funds bribe congressmen of both parties (bribes made easier by the Supreme Court's plutocratic Citizens United decision). To call their fees capital gains is farcical. True capital-gains transactions put the gainers' capital at risk. Hedge-fund fees are not at risk. Hedge funds gamble with their clients' money, not their own.

What do hedge funds contribute to the economy for their favored treatment? Vulture capitalism is a major hedge-fund practice. They buy companies with debt that finances their huge (20-percent) fees, unload workers, and then return the companies to public markets.

Several years ago, the Carlyle Group took Hertz private, back to public six months later, siphoning off $1 billion in fees. Former No. 1 Hertz is now No. 2. Financial gurus Paul Volcker and Warren Buffett ridicule hedge funds and their useless parasitic gambling ventures.

The claim that hedge funds create jobs is a sick joke. Hedge funds proliferated during the Bush 43 administration. In Bush's eight years the economy lost 700,000 private-sector jobs. Under Clinton, when hedge funds were fewer and less active, the U.S. gained 21 million jobs. Hedge funds destroy jobs, through outsourcing designed to cut corporate taxes.

Hedge-fund thievery is only one aspect of the Reagan-initiated plutocracy. Since Reagan's 1981 inauguration, corporations pay 78 percent less in federal taxes. Parasitic bankers, whose reckless gambling brought us the 2008 financial meltdown, are unpunished and thriving. It was all made possible by gullible, middle-class suckers, Republican voters ignorant of the economic facts.

• C.W. (Bill) Griffin is a retired consulting engineer. He has lived in Ahwatukee Foothills for 22 years.

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