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No Small Time Steve Schwarzmans How The Blackstone Bill Could Cut Ordinary Investors Off From Private Equity Profits

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Over the past few years, the business of private equity has made a tremendous amount of money for a small number of people and institutions. And, if the top lawmakers on the Senate Finance Committee get their way, the number of people who participate in the profits of private equity isn’t likely to grow by very much.
One little noted effect of the move afoot on Capitol Hill to treat private equity and hedge funds as corporations after they go private will be to prevent ordinary investors from participating in what has been one of the biggest sources of wealth on Wall Street in recent years. The “Blackstone Bill” introduced by Senate finance committee head Baucus-Grassley would force private equity firms going public to pay the corporate tax—a huge expense that may chill the desire of firms to go sell equity to the general public.
“The little guy is going to be permanently shut-out,” one expert in corporate taxes told DealBreaker.
Until some private equity firms recently began offering funds that are publicly traded, most the prosperity of private equity over the past few years had been enjoyed exclusively by wealthy individuals and institutions that invest in the funds of the firms, and the partners who own them. The decision to go public would have let ordinary investors into this exclusive club.
But lawmakers on Capitol Hill seem intent on keeping that club exclusive, all in the name of tax fairness. Even if the tax change does not prevent the PE firms from going public (Alan Abelson of Barron’s thinks it won’t), it means that the companies the public can buy into will be far less profitable after taxes than the companies owned by the Steve Schwarzmans and Henry Kravises of the world.
Perils of Going Public [Barron's]