Jan. 28, 2010 -- A huge Wall Street payday is raising questions as to whether the nation's top earners should benefit from tax breaks while so many unemployed Americans continue to struggle.
Hedge fund manager John Paulson made more than $5 billion in personal profits last year, the Wall Street Journal reported today. The jaw-dropping figure works out to roughly $159 rolling in every single second.
Industry experts say it could be the largest yearly haul ever for a financial trader, but the stunning income is hardly new for Paulson. He set the previous record of $4 billion in earnings in 2007 by betting against the risky mortgages that brought down the housing market.
Giant paydays may be back for Wall Street's top earners, but across the country the jobs aren't. The newest income record comes as the nation's unemployment remains stuck at more than 9 percent.
Capital Gains Taxed at Lower Rate
On top of that, a good portion of Paulson's profits are considered long-term capital gains, income that is taxed by the federal government at a rate of 15 percent. Meanwhile, most Americans pay an income tax rate up to 35 percent.
The seeming disparity has some lawmakers angrily asking the question, why are hedge fund managers benefitting from tax breaks that the average American family does not receive?
"I think it's outrageous," said Rep. Sander Levin, D-Mich. "He should pay like everybody else does, ordinary income taxes. He's simply managing other peoples' money, not his own."
Closing Loophole Could Generate $25 Billion, Lawmaker Says
Levin argued that closing the loophole could bring in $25 billion in taxes over the next decade alone, but the lawmakers will have a tough time changing regulations with a White House focused on strengthening ties to the business community.
The Obama administration has sought a fresh start with big business, reaching out to Wall Street and the U.S. Chamber of Commerce.
"The government has tried repeatedly to tax these guys more, and they tend to back away because of lobbying, so I expect they'll continue to make these astronomical sums," said Sebastian Mallaby, the author of "More Money Than God."
John Paulson Defends Tax Rate for Top Earners as 'Fair'
There are signs that the Obama administration is at least aware of the outrage. Just today, Commerce Secretary Gary Locke acknowledged to ABC News that Paulson's hedge fund payday is enormous.
"It's really part of the bizarre tax code that we have," Locke said.
Paulson has defended the smaller taxes for elite top earners. At the height of the recession in November 2008, he spoke before the House Committee on Oversight and Government Reform.
"We certainly appreciate your concern for fairness in tax code, but I will say I believe our tax situation is fair," Paulson said.
ABC's Bradley Blackburn contributed to this report.