Hedge fund managers get a tax exception. An executive salary is taxed at 39 percent, the highest rate for earned income. But the income of a hedge fund manager is taxed at only 20 percent, which is the highest long-range capital gains rate—even though the hedge fund manager is deriving income that’s directly earned.
This is not law but a rule or procedure by the IRS. The IRS is part of the Department of the Treasury. The secretary of the Treasury is appointed by the president and is part of his Cabinet. The President can order the Treasury Secretary to change this immediately.