If you were trying to design the perfect political fund-raising tactic, you probably couldn’t have come up with a better one than the private equity tax-hike proposal that has been haunting Capitol Hill this year. Despite their riches, private equity firms had not been very involved in politics until this year. But in the wake of the proposals they have reportedly spent millions of dollars to defeat the proposals.
And if something is working that well, you don’t just shut it off by bringing the proposal to a vote. Far better to keep the proposal—and the millions in campaign donations and funds for your friends in lobbying—alive for a bit longer. Especially when you have a big election year coming up.
As it turns out, that’s precisely what Senate Majority Leader Harry Reid has announced he is doing. The gullible reports make it sound like a victory for the lobbying efforts of the private equity firms, when in fact it is simply a rent-extraction victory for lawmakers and lobbyists. Basically, it is the political class shaking down the financial class for a bit of the wealth.
Ain’t democracy grand?
Update: Larry Ribstein has much the same reaction.
Buyout Firms to Avoid a Tax Hike [Washington Post]