It is the politics of envy. On the campaign trail Barack Obama talked about the 95% of middle income earners and exacerbated the divide between them and the 5% of high earners. It helped bring more voters into his constituency, and subsequently the US Congress has become excited about using the tax system to cane anyone perceived to have made money before the crisis.
A hot proposal is to tax non-US corporations (for example Cayman companies) at 35% if those companies are managed by persons sitting in the States.
Investors therefore will get taxed if they want to access the US asset management market through US managed funds domiciled offshore.
It seems like a kamikaze tactic designed to torpedo their asset management industry. But the managers affected need not feel despondent, as they are guaranteed to be given a good welcome if they opt to move house to Asia.
"Another alternative, which can be done on a tax transparent basis, is to invest through a US limited partnership, which would result in no tax. But investors don't want to do that as it tells the IRS who you are," according to David Goldstein of White and Case, who recently visited Hong Kong.
Meanwhile, the runaway train of class war and internecine envy is still bedevilling US lawmakers. It is quite possible that the US President merely perceived it as campaign rhetoric to use the anger generated for his advantage, and will ultimately not support this plan. That would emulate the same way in which he kept quiet about the bonus clawback issue, before saying he didn't think it was a good idea. It's still odds against that this plan will make it into law, but if the President did truly believe that fund managers and investors deserved to be hung, drawn and quartered by the taxman, it would be frightening.