Senate tax bill takes aim at Blackstone

MarketWatch ^ | Jun 14, 2007 6:56 PM ET | William L. Watts,

[Ernest_at_the_Beach]

WASHINGTON (MarketWatch) -- Private-equity giant Blackstone Partners, which is in the process of going public, found itself in the sights Thursday of the powerful Senate Finance Committee as top tax writers introduced legislation that would block publicly-traded private-equity and hedge funds from continuing to enjoy favorable tax treatment.

The legislation would require publicly-traded partnerships to be treated as corporations for federal tax purposes. Under current law, income distributions for many private-equity funds are taxed at the capital-gains rates of 15% -- well below the top corporate tax rate of 35%.

Blackstone, which is expected to hold its initial public offering later this month, would get a five-year reprieve, but would become subject to the corporate tax rate in 2012. A spokesman for Blackstone declined comment on the proposal.

The lawmakers - Finance Committee Chairman Max Baucus, D-Mont., and Charles Grassley, R-Iowa - also wrote to Treasury Secretary Henry Paulson to ask whether his department planned to take any action to address tax concerns surrounding the Blackstone IPO.

The senators say that allowing publicly-traded private-equity funds to enjoy favorable tax treatment would be unfair to other corporations. What's more, fund partners are acting largely as investment advisors and asset managers rather than investors, according to critics, who say taxing returns as capital gains puts other financial-services firms at a disadvantage.

"We must make the law clear and apply the law fairly, or risk the erosion of our corporate tax base," Baucus said.

[Ernest_at_the_Beach]

fyi

[Sunshine Sister]

Can’t have erosion of the tax base now can we?

[Grampa Dave]

Excellent and about time.

During the Clintoon years these groups seemed to grow and prosper.

This whole dirty secret of so called non profits and private funded companies competing with the rest of us needs to be aired and eliminated in many cases.

We have so called non profit hospitals building so called fitness centers and other free standing centers which compete with private practioners. They often financially back/guarantee physicians/nurse practicioners in their first year or so of practice. This is in direct competition with MDs not funded by the hospital.

Churches start out with rummage sales and similiar other fund raisers which sometimes morphs into church stores selling merchandise and competing against local businesses.

There is even a new Exchange Traded Fund, ETF, which invests in privately held corporations which take that funding to refi or to finance competition against pubicly owned firms.

As the Dinosaur Fishwraps stagger into their own tar pits, we hear of talk of privately held companies buying out these losers. Some of this talk is paired with Clintoonites like Ron Burkle, who uses little of his money and spends retirement funds from unions and states buy the failing businesses and to fund them without real profits.

[Ernest_at_the_Beach]

That is an eye popping difference in tax rates...engineered by the anti-capitalism crowd...

[Grampa Dave]

“That is an eye popping difference in tax rates...engineered by the anti-capitalism crowd...”

You nailed it Ernest.

Most conservatives don’t realize that the brain power of the left, their elite are fascists, who hate capitalism.

They are constantly engineering legislation to favor their fascists business owners, who don’t like competition. Their model is pre WWII Germany where the Fascists made sure that their companies had minimal competition if any.

[FastCoyote]

So to be fair, you can:
1) raise all tax rates to 35%
Or
2) lower all tax rates to 35%

Since I doubt 1 in 50 corporations pay 35% after their accountants have squirreled away the nuts, in my ever so humble opinion they ought to lower the tax.

[FastCoyote]

OOOOooooops. Try that again. Wish we could edit these posts.

So to be fair, you can:
1) raise all tax rates to 35%
Or
2) lower all tax rates to 15%

Since I doubt 1 in 50 corporations pay 35% after their accountants have squirreled away the nuts, in my ever so humble opinion they ought to lower the tax.

[Liz]

..........about time. During the Clintoon years these n/p groups seemed to grow and prosper. This whole dirty secret of so called non profits and private funded companies competing with the rest of us needs to be aired and eliminated in many cases..........

Thankfully for us, you're the FReeper who was on top of this issue from the getgo, raising our awareness of the scam. Thanks, again.

[D.P.Roberts]

This is hilarious. Now that the small investor is getting in, the “champions of the little guy” are raising the rates.