Sunday, May 23, 2021

PEU Boys Outraged by Possible Removal of Preferred Taxation


In the gilded realms of private equity, where mega deals and mega paydays beckon, the masters of leveraged buyouts are feeling a little put out.

From Park Avenue to Palm Beach, the conversation keeps turning to the same uncomfortable subject: an onslaught of taxes and the closing of the Billionaires’ Loophole.

After years of idle threats, Washington is talking seriously about ending the tax break that has helped private equity become one of the most lucrative corners of U.S. finance. Adding to the injury, other taxes on income and capital gains would also rise.

Private-equity types are, predictably, outraged.

For wealthy people like them, going after carried interest -- basically, their cut of the profits -- strikes many as anti-business, if not anti-American.

Preferred taxation for the greed and leverage boys has been a fixture under America's policy making billionaires.  Private equity founders like Carlyle Group's David Rubenstein and Blackstone's Stephen Schwarzman descended on Capital Hill to stymie past attempts to rectify this gross tax inequity.

Flash back to2011 when a former major business news reporter wrote:

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

The private equity underwriter (PEU) lobbying group aided the blitz to keep preferred carried interest taxation intact.  I referred to the earlier version as PECKER, Private Equity Capital Knowledge Executed Responsibly.  In their name change they ignored my suggestion, settling on the vanilla American Investment Council.

Private equity’s formidable Washington lobby, the American Investment Council, is willing to talk. It’s working to convince members of Congress to protect the industry’s interests.

President Biden's cabinet and White House are chock full of PEUs.   Somehow with corporate valuations at stratospheric levels and a widespread proliferation of private equity firms, the amount of incremental taxes projected decreased

Scrapping the carried interest loophole could raise an estimated $15 billion from the wealthy over 10 years, according to a congressional committee.

When push comes to shove it will be interesting to see who's voice wins.  Will it be the general public who's long wanted the obscenely rich to pay more or policy making PEU billionaires?  The public is yet to win this battle.