America’s Most Coddled

Senator Charles Schumer got partway off the fence this week on the issue of whether the most highly paid Americans — mainly partners at hedge funds and private equity firms — should continue to enjoy a super-low tax rate. Currently, at a typical hedge fund or private equity firm, partners pay a flat tax of 15 percent on most of their mega-earnings. Salaried employees and wage earners — the majority of the work force — face income tax rates as high as 35 percent.

Mr. Schumer’s position, outlined by the New York Democrat during a recent interview with Times reporters and in a Senate hearing on Tuesday, is that it would be unwise and unfair to support a tax increase on financial firms unless it is also applied to other partnerships that get the same tax break, such as those in the oil and gas and real estate industries.

Fine. In that case, Mr. Schumer should lead an effort to persuade his colleagues that proposals to raise taxes on private equity firms do not go far enough. As a longtime champion of Wall Street, Mr. Schumer has the credibility to call for real change. He is also a member of the finance and banking committees, which have jurisdiction over the issue.

Showing such leadership could help dispel the sense that Mr. Schumer does not want to challenge the industries he has assiduously courted as chairman of the Democratic Senatorial Campaign Committee. He has raised large sums from the hedge fund and private equity industries — $1 million June alone.

That money may help get more Democrats elected to the Senate, but at a price. The donors’ super-low tax rates mock Democratic Party values of equity and progressivity and, by extension, the politicians who allow those rates to persist. Left unchanged, they will also make it more difficult for the Democratic-controlled Congress to raise enough revenue to achieve its stated goals of expanded health care, better education and lasting relief from the alternative minimum tax for the middle class.

Tweaking the tax bills of the richest 1 percent of Americans, an idea Mr. Schumer has spoken of approvingly, simply won’t be enough. And it would skirt the core issue. There is no compelling tax policy argument in favor of the low tax rate enjoyed by the partnerships now under scrutiny.