If you feel that taxes are a valid way for a government to implement social engineering, encouraging some behaviors and discouraging other behaviors, than you can't ever complain about the complexity of the US tax code.
I would wager that a lot of people who nod their heads that this is a good idea, also wax poetic at parties about how the tax code is broken and overly complicated.
I might well fit in that latter group, but I consider that the 'engineering' in this case was on the part of the fund managers.
The managers have basically been surfing on the tax status of their investors' gains. Funds of their own which were actually invested are still taxed at the capital gains rate. But the managers' bonus can not seriously be called capital gains, because it gets paid when they make a profit but they have no corresponding liability to their investors if the fund should lose money. It's not as if the investors were somehow lending a portion of their investment to the manager, or s/he would owe repayment regardless of performance. Any portion of the investors' gain paid as a bonus is income and deserves to be taxed as such.
The lower tax rate on capital gains is meant as an incentive for people to invest their assets instead of just hoarding them; investment implies an element of risk.
Main point: while there's a good argument to be made for incentivizing people to invest their capital, there's no good reason why one kind of money manager (or, really, professional of any sort) should be taxed less than another. Just because you work with money shouldn't entitle you to lower taxes, unless you're actually investing your own.
The interesting point that this article brings up is that people are willing to pay a few cents for each share of stock they are selling, but they aren't willing to pay a few cents to send someone to Mars. If they were, then engineering would pay as well as finance.
(A more practical example -- people aren't willing to pay a few dollars to get to their destination faster. We paid engineers to make really cool airplanes like the Concorde, but nobody was willing to pay the premium over conventional 1950s-era technology, so that's what we fly around in today. Money is the answer to everything. The finance industry figured out what people are willing to pay for and how much they're willing to pay, and that's what they charge. Hence, we have ask/bid spreads, $50 overdraft fees, 22% interest rates, and so on. It's apparently how people want to spend their money, and it makes finance a profitable industry. The multi-trillion dollar bailouts are helpful, too.)
People are willing to pay a few dollars to get to their destination faster. For example I always take the direct highspeed trains over the slow train the stops at every town, and happily pay the premium.
However with the concord it wasn't 'a few' dollars, it was close to an order of magnitude over the cheapest tickets. It also really didn't get you there that much faster, if you count your travel time from you leave your house until you get to your hotel. For example to fly to New York I would have to leave my house 2.5 hours (at the latest) before my flight, then spend 1.5 hours flying to the nearest airport with direct flights to New York, then spend 3 hours waiting for that flight, then 7 hours on the flight to New York, then 2 hours getting out of the airport and then I still have to get to my hotel. So all that concord did for me was reduce a 14 hour trip to 10.5 hours, and the place where it saved time was in the least annoying part of the trip. Concord basically optimized away least painful part of the journey, and that simply isn't worth paying that much money for. Now had someone found a way to get me from my front door to my hotel in New York in say under 5 hours, then all of a sudden I'm interested. Or if someone found a way in which I could show up the airport 10 minutes before my flight leaves and get out of the airport 15 minutes after arriving the gate (but making it significantly cheaper than chartering a private jet), again I'd be very interested, no matter how slow the actual flight was. So yes, people want to pay to get to their destination faster, but concord-like airplanes aren't the solution to that problem.
The reality is that JFK-LHR and JFK-CDG were not really very long flights to begin with. I'm not sure why the Concorde was used for those routings.
But for routings like ORD-HKG or JFK-NRT, I think a faster airplane would be a good solution. These flights, when I've flown them (actually PVG-ORD and ORD-NRT), have been completely full in first and business class -- and first class is over $10,000 one way. I think people would be OK with a smaller seat if it meant they were in the air for 6 hours instead of 13. 13 hours is a lot of time to kill, even if you have a fully-flat bed and laptop power. (For me, anyway. I can't sleep on planes at all, even in the good seats.)
I don't completely agree with your numbers about travel time to and from the airport though. It takes me 45 minutes to take the subway from my house to ORD, and then 30 minutes to get from check-in to the gate (10 minutes before departure, of course). So that's 2 hours on one end. On the other end, it's never taken me more than 2 hours to get from an airport to city center... even in Tokyo (where the airport isn't even in the same prefecture as Tokyo). London is particularly easy; immigration is pretty efficient, and the express trains to Paddington are very fast.
Anyway, I think the Concorde discontinuation was due to "maximizing shareholder value" rather than revenue issues. Concorde was considered the "best" option between two cities that had Concorde service, but it was usually less expensive than "real" first class. That is a lost revenue opportunity, Concorde resulted in less profit per passenger-mile, and it cannibalized the super-profitable high-end business.
(That's what's really holding society back -- shareholders.)
1) Carried interest is still a fee. It should not be tax advantaged. It should be taxed like any other fee. This is actually a minor point, the author spends 1 paragraph out of 7 on this.
2) Financial services attracts more capable minds than it should because it can pay better. Taxing it at a higher rate would "level the playing field" encourage "more productive activities".
2a) Raising the tax will not reduce investment because its not taxing the sources of capital more, just the managers of capital more.
2b) Raising the tax will encourage managers to invest more of their own money rather than others' money. This will encourage better performance since they have more skin in the game
3) We need to balance the budget. This is a good source of revenue
I totally agree with point 1 with no qualifications. I don't disagree with point 3 but I'd like to hear a good reason why this is one of the better sources of revenue amongst all others.
I generally agree with point 2a, but don't really agree with point 2b. I agree that having more skin in the game makes you more digiligent and cautious, but the author fails to show that managers don't already have all/most/as much of their money invested in their own fund as they can or the mechanism that causes their risk tolerance to change such that they change their asset allocation.
I have serious issues with point 2. Firstly, carried interest only applies to funds/investments that qualify for long term capital gains treatment. I generally disdain those areas because I think its more fluff than science/business sense, but some areas like VC may require science/technology oriented people who can see the possiblities in the business better than someone who's just an MBA. But if you didn't have smart people deploying capital to these risky technologies because they had a better understanding, then these technologies would never get funded.
More fundamentally however, the author fails to qualify what makes one endeavour more productive than another. Is google productive? They harvest information and profit off of it. Does it make people more productive? Maybe, but I have yet to see a study on the ratio of productive to non-productive searches. In the end, google makes money because they're helping connect buyers and sellers. Is marketing a productive activity?
If someone creates scientific breakthroughs in pharma/chemistry is it still productive if the end use is to make cosmetics or cosmetic treatments for people? Or what if its any technology that creates more free time for people by automating some part of their life. Is it still a productive development if all the people do with their free time is entertain themselves?
Full disclosure : I'm an ex-engineer who last worked at a quantitative hedge fund. I think I'm doing more intersting things and potentially creating "more societal benefit" by arbitraging "mispricings" in the market than I would working in most companies/labs. This is partially because most companies/labs are not doing anything that societally productive, so there's a low bar to cross.
I would wager that a lot of people who nod their heads that this is a good idea, also wax poetic at parties about how the tax code is broken and overly complicated.