Sunday, June 13, 2021

PEU Tax Avoidance News

Private equity underwriters (PEU) firms have been front and center in the news.  NYTimes revealed policy making billionaires not only kept their preferred carried interest taxation, they'd neutered IRS checks making sure they paid what little actual taxes owed.

Ignored Americans have long wanted the wealthy to pay a higher tax rate.  Elected officials sided with the PEU boys over common constituents.  Consider this story from 2010.

Carlyle Group co-founder David Rubenstein’s cell phone rang as he was speaking to supporters of the Economic Club, at the Phillips Collection. He left the stage to take the call. Among those in the audience was Gary Shapiro, the consumer-electronics lobbyist who was Rubenstein’s travel companion to Japan in the eighties. After a few minutes, Shapiro recalls, Rubenstein returned and said, “That was a senator. That one call just saved us on carried interest."

The effort to remove preferred PEU taxation failed time after time.  

The Trump administration's farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses.  Private equity has conquered the American tax system.
Politicians Red and Blue love PEU.  The greed and leverage boys learned the importance of political connections early on and after decades of influence peddling private equity is intertwined with American government.  Obama's Health Reformer held residual, undeclared private equity holdings while ensuring health care costs remained absurd.  

The Carlyle Group's purchase of giant medical supplier MedLine will not bring down healthcare costs.  It will add huge interest costs, management fees, deal fees and intermittent dividend bleedings.   PEU healthcare brought surprise medical billing and giant nursing home/hospital bankruptcies (ManorCare and LifeCare Hospitals). 

The Biden cabinet is chock full of PEUs.  It's not clear if they will be more forthcoming about their residual PEU investments than Nancy-Ann DeParle.  

While writing this piece two Pine Island Capital directors, one former and another current, graced This Week with George Stephanopolis, Secretary of State Anthony Blinkin and panelist Michele Flournoy.  Blinken later showed up on Face the Nation.

Private equity has long tried to sell its business model as beneficial, yet that effort has been perennially unsuccessful.  Enough citizens have worked for a private equity owned affiliate and know their aversion to wage increases and benefit improvements rivals their unwillingness to pay taxes.

The American people know their wishes mean little to nothing to elected officials.

Update 6-17-21:  Outrage over the revelations are mostly aimed at the leaker within the IRS.  When will we stop shooting the messenger and act on the very disturbing message?