Private Equity buyout tax loopholes make the rich richer but might hurt average Americans.

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Of Private Equity, Politics and Income Taxes by Andrew Ross Sorkin, New York Times
Uncle Sam may be coming after the buyout kings. If the tax collector gets his way, Henry R. Kravis, Stephen A. Schwarzman, David Bonderman, David M. Rubenstein and the rest of the leveraged-buyout crowd could soon be forced to add some zeros to the taxable income line on their federal forms… Read on.
by Nomi Prins, Mother Jones
History is pretty clear on this one: Whenever the finance industry discovers a path to quick investment riches for a select few—S&Ls, junk bonds, Long-Term Capital Management, Enron, the list goes on—a massive reckoning can’t be far behind. Today’s implosion in the making? Private equity… Read on.
A Professor’s Word on a Buyout Tax Battleby Andrew Ross Sorkin, New York Times
MORE than a year ago, Victor Fleischer, an untenured professor at the University of Illinois College of Law, finished a draft of a paper about the tax treatment of private equity. At the time, he was just hoping to get the paper published. Taxes are an unglamorous topic, and… Read on.
Talk about an inside job. It’s little wonder that CEO pay continues to soar when the consulting firms many corporations hire to determine executive pay levels also earn millions of dollars for handling other consulting work for the same company. After all, why tick off… Read on.
The KKR Way (pdf)by Richard Teitelbaum, Bloomberg
The deals are just the start. The original ‘barbarians at the gate’ now command a $107 billion global empire. Here’s how the buyout giant fires up its companies with a profit-or-perish creed. It’s a great time to be Henry Kravis, as he’s quick to remind people… Read on.
IRS Probes Hedge Funds, Buyout Firms for Tax Abusesby Alison Fitzgerald and Ryan J. Donmoyer, Bloomberg
The Internal Revenue Service has begun an inquiry into suspected tax abuses at hedge funds and private- equity firms after determining many firm partners don’t file returns and may have improperly characterized transactions. The tax-collection agency is studying whether funds… Read on.
A Backlash Against Billionaires by David Ignatius, Washington Post
For mysterious reasons, people can suddenly become indignant about government policies they have accepted for years as a matter of course. Such a seismic shift seems to be happening in public attitudes toward taxation of America’s super-rich financiers. The three leading Democratic candidates… Read on.
When business barbarians take hostages (pdf)by David Sirota, Denver Post
As a central villain in the famous book “Barbarians At the Gate,” Henry Kravis has become one of the world’s richest mavens of private equity — the Wall Street sector that buys up companies, breaks them apart and sells their assets. In 2006, Kravis made $450 million, or more per hour ($51,000) than the average American makes in a year… Read on.
How a Blackstone Deal Shook Up a Work Force by Ianthe Jeanne Dugan, Wall Street Journal
Not long after the Blackstone Group bought Travelport Ltd. last August, workers at the company’s office campus here began feeling the squeeze. Two months after the deal closed, scores of employees were lugging boxes of personal belongings to their cars, having lost their jobs. Under Blackstone’s ownership, the travel-reservations conglomerate has laid off 841 people, about 10% of its work force… Read on.
“Everything about America is threatened today … this is an epic struggle for the future of America,” Edwards told the cheering crowd. “Corporate greed and the very powerful use their money to control Washington and this corrupting influence is destroying the middle class.” While all of the presidential campaigns… Read on.
Corporations Increasingly Run This Countryby Rick Coddington, Mountian Mail
Today we are living under the control of that military-industrial complex. In 1975, there was a great movie called Rollerball starring James Caan. In a nutshell, it was about a futuristic society (2018) where corporations controlled everything. Not individual corporations mind you, but giant worldwide conglomerates… Read on.
Pirates of Private Equityby Adam Doster, In These Times
Private equity funds are complicated entities. Essentially, they are unregulated pools of private capital raised and controlled by investment managers, otherwise known as “general partners.” Typically, managers buy up undervalued companies, de-list them from public exchanges… Read on.
Penny Foolishby Eric Schlosser, New York Times
Florida’s tomato growers have long faced pressure to reduce operating costs; one way to do that is to keep migrant wages as low as possible. Although some of the pressure has come from increased competition with Mexican growers, most of it has been forcefully applied by… Read on.
Mr. Kravis Goes to Washington (Capra Rolls Over)by Stephen Labaton and Jenny Anderson, New York Times
Henry R. Kravis, the billionaire founder of the corporate buyout movement, was working the hallways of Capitol Hill, hoping to kill legislation that would raise his taxes and those of other investment fund executives. While known to powerful people in Washington through longstanding personal.. Read on.
Talk of the Town (pdf)by Michael Shnayerson, Vanity Fair
Topping each other’s deals — $31.4 billion! $39 billion! $45 billion! K.K.R.’s Henry Kravis and the Blackstone Group’s Stephen Schwarzman are locked in combat at the top of the private-equity heap. The rivalry has only sharpened since Blackstone’s I.P.O. sparked public outrage.. Read on.
On the eve of the 1986 leveraged buy-out of Safeway Stores Inc., the board of directors sat down to a last supper. Peter Magowan, the boyish-looking chairman and cheif executive of the world’s largest supermarket chain, rose to offer a toast to the deal that had fended… Read on.
Hundreds of migrant farmworkers marched through Miami this past Friday to protest a Florida tomato grower maneuver that will cut some tomato picker wages by 40 percent. The growers are refusing to honor deals the state’s top farmworker group has cut with McDonald’s and Taco Bell… Read on.
Last Friday, Rep. Sander Levin (D-MI) introduced a bill to remedy a long-standing tax inequity that allows private equity fund managers the right to claim performance fee income as capital gains rather than ordinary income. This tax break, based on the misnomer “carried interest,”… Read on.
Lobbyists Try to Quell Frenzy Over Private-Equity Fund Taxby Jeffrey H. Birnbaum, Washington Post
Soon after Rep. Eric Cantor called a meeting of lobbyists two weeks ago, his aides had to find a larger room. Instead of the couple dozen they had expected, 75 showed up. Cantor, a Virginia Republican, convened the gathering to discuss how to defeat a set of fast-moving proposals that would vastly increase taxes on private-equity firms and hedge.. Read on.
The Private-Equity Scam by Robert B. Reich, The American Prospect
This week, Senators Max Baucus and Charles Grassley, the chairman and ranking minority member of the Senate Finance Committee, have been holding “informal meetings” to consider whether the stratospheric incomes of private-equity partners ought to be treated as compensation rather than as capital gains, for tax purposes. Way back in the 1970s, newly-minted MBAs… Read on.
Private equity chief says CGT is too low by Jean Eaglesham, Financial Times
A leading private equity executive on Friday broke ranks with his industry by arguing it does not pay enough tax and warning that the government’s capital gains tax reforms, designed principally to tackle perceived abuses in the sector, would not be sufficient to silence critics. The intervention by Jon Moulton… Read on.
Greed by Cliff Schecter
“Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit.” So said fictional character Gordon Gekko, the embodiment of a 1980s corporate raider in the movie Wall Street. Yet, sadly, just as the Gekko character was based… Read on.
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Jeff Faux is the principal founder of the Economic Policy Institute (EPI) of Washington, D.C. He was President of EPI from 1985 until August 2002, when he became the Institute’s first Distinguished Fellow in order to devote more time to his research and writing. He is also the author of The Global Class War. Read full bio.
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*Based on Henry Kravis’s 2006 income of $450 million as reported in Forbes magazine. Calculated at a tax savings of 21.45% (35% income tax + 1.45% Medicare Tax 15% carried interest paid), Henry Kravis saved approximately $96 million in taxes in the year 2006.

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One Response

  1. […] the tax collector gets his way, Henry R. Kravis, Stephen A. Schwarzman, David Bonderman, David M. Ruhttps://westtnliving.wordpress.com/2008/05/07/private-equity-buyout-tax-loopholes-make-the-rich-riche…The global slump of 2008-09 has begun as poison spreads Daily TelegraphThe avalanche of bankruptcies […]

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