Taxing Private Equity
Killing A Goose That Lays Golden Eggs
By California Yankee Posted in Congress — Comments (3) / Email this page » / Leave a comment »
Steve Forbes takes Congressional proposals to boost taxes on private-equity companies to task:
The Baucus-Grassley legislation in the Senate and the Levin bill in the House to hike levies on private equity and overhaul the taxation of publicly traded partnerships are dangerous. They will inevitably harm American investors and our overall investment climate.[. . .]
Between 1991 and 2006, private equity firms world-wide created more than $430 billion in net value for investors -- which include universities, charitable organizations and pension plans covering tens of millions of Americans. Thus the superior investments of private equity firms translate into stronger pension plans, more financial aid, and scholarships at public and private colleges, and more funds for research to cure or treat diseases.
A Democratic controlled Congress just can't resist the opportunity to kill a goose that lays golden eggs. Do you realize that the U.S. already has the second highest corporate tax rate in the world? The proposals to double or triple the amount of taxes private equity companies pay won't do anything but diminish the public benefits these economic engines provide.
Private equity firms provide better than average returns for some of the nation's largest public pension funds, benefitting teachers, students, police officers, firefighters and enabling several states to avoid budget cuts or tax increases that would have otherwise been required to meet their obligations to retirees who have devoted their careers to public service.
Just like adopting the now reviled Alternative Minimum Tax to soak it to the rich, raising taxes on private equity firms will have unintended consequences. In the end, regular folk like you and I will be the ones that pay.
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Taxing Private Equity 3 Comments (0 topical, 3 editorial, 0 hidden) Post a comment »
There are lots of big companies, like say Fidelity, Vanguard, etc that pay corporate taxes on their profits from managing people's money. The fact that the law currently allows partnerships and S-corps(?) to arrange to pay significantly less in taxes doesn't seem right to me. How is that a level playing field?
I don't believe this used to be a problem since before the Bush tax cuts the tax rates were relatively the same so the incentives where smaller. If the partnership was investing their OWN money I can see keeping things the way they are, but they are investing other people's money which makes it a no-risk operation just like their regular corporate competitors. We're talking billions here...
On a separate note, the NY Times had an article on how as a private company you can manipulating goodwill (the economic kind) to escape even more taxes. Again, how is this a good thing?
I don't think exotic bookkeeping, foreign tax shelters, etc should allow corporations to escape taxes that simple straightforward US companies are paying because in the end that just ends up raising our taxes or the taxes on entirely US based companies. That doesn't sound like a good plan to me.
Keep it simple and keep it a level fair playing ground.
I hope they're OK when all those private equity firms relocate offshore tho- because that's what'll happen.
The right tax rate for business is zero.
The tax proposal that'll deliver on this is the FairTax (http://www.fairtax.org).
...when it's the *empathy* that really matters?
The Dems are far too busy doing what "feels good" and polishing their anti-capitalism playbook to care about the real world consequences of their emotional pandering.
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"We want great men who, when fortune frowns, will not be discouraged." - Colonel Henry Knox