Three years ago the Senate Republicans were poised to vote on Trump’s $trillion tax cut giveaway to billionaires and large corporations. The final vote they needed to pass the measure was that of Susan Collins, who was considering a last-minute change in a tax loophole that benefits primarily Private Equity firms. The so-called “carried interest” loophole allows the Private Equity managers to report the gains on the sale of companies they loot as capital gains instead of ordinary income — a tax break worth at least 20%. This may not seem like much, but given the $billions the PE industry rakes in each year it is worth $millions to the general partners of these firms. But if there is any group that does not a tax break it is Private Equity:
“A handful of super wealthy multibillionaires have accumulated vast riches from running private equity funds that have performed no better on average than basic US stock market tracker funds since 2006. The number of private equity barons with personal fortunes of more than $2bn has risen from three in 2005 to 22, according to a new analysis which estimates investors paid $230bn in performance fees over a 10-year period for returns that could have been matched by an inexpensive tracker fund costing just a few basis points. “This wealth transfer from several hundred million pension scheme members to a few thousand people working in private equity might be one of the largest in the history of modern finance,” said Ludovic Phalippou, professor of finance at Oxford Saïd Business School.”
In the end, for reasons still unclear, Susan Collins caved: “carried interest” still survived and Trump got his signature tax giveaway. Now Susan is reaping the benefit of her vote:
Nearly three years later, Collins is facing a tough reelection battle and the private equity industry has become her most reliable source of donations. She has gotten more than half a million dollars in campaign contributions from the private equity industry this cycle, more than any other senator, according to the Center for Responsive Politics, which tracks political donations.
What’s more, Steve Schwarzman, the billionaire chairman and chief executive of the private equity giant Blackstone, has given $2 million to a super PAC backing her. (Schwarzman, a major Republican donor, has also given $20 million to a super PAC supporting Collins and other Republican Senate candidates.) The failure of Collins’ amendment likely saved Schwarzman alone tens of millions of dollars in taxes, according to tax experts.
With its scorched-earth practices, Private Equity has only made worse the general suffering during the pandemic. For years, Private Equity has been acquiring nursing homes and siphoning off profits while cutting skilled nursing staff and cutting investment in life-saving PPE and equipment. Private Equity firms have been buying hundreds of thousands of residential homes, charging exorbitant rents, and now evicting tenants despite the CDC eviction moratorium. Private Equity has been buying up hospital emergency room and ambulance operations, resulting in “surprise billings” for COVID-sick patients. And then there are the hundreds of thousands retail workers who have lost their jobs at name brand outlets such as Toys-R-Us and Nieman Marcus after Private Equity loaded the companies with debt and forced them into bankruptcy — but not before paying themselves hundreds of $millions in “dividends” and “management fees”.
Susan Collins has done enough damage. She must be voted out on November 3rd!