Jun
24
Written by:
Russ Henke
6/24/2007 5:33 PM
Among all the factors plaguing the vast majority of US citizens, very little space in these blog entries to date has been devoted to the unremitting and enervating trend over the last six-and-a-half years, of the rich-getting-richer, and the poor-getting-poorer in the United States.
With the US government (a) providing unwarranted tax cuts favoring the rich, (b) encouraging rising energy prices by condoning the lack of new oil refineries, (c) stoking international fear, anxiety and doubt, and (d) implementing countless other such policies, the resulting economic conditions have allowed the US wealthy to thrive while US workers’ wages have not even kept up with inflation, despite massive worker productivity gains during the period.
In the last few days, we have witnessed a quintessential example of the “rich-getting-richer” syndrome. Run by billionaires, the private-equity giant Blackstone Group popped up again in the news June 21, 2007 when Representative Henry Waxman, Democrat and chairman of the House Committee on Oversight and Government Reform, said the Blackstone group's much-anticipated initial public offering “would present potential investors and the public with new and undisclosed risks, while stripping them of necessary protections.” Representative Waxman urged the SEC to hold up the Blackstone IPO.
But Waxman was way too late. The IPO went forward on June 23. It was the biggest such deal in five years and the sixth-largest of all time.
The Blackstone stock opened June 23 well above the $31 a share at which it had been priced. By the market’s close, the stock had risen $4.15, or 13.4%, to $35.15. One of the partners, who made $400 million in 2006, benefited from the IPO, ending the day with a stake in Blackstone valued at more than $7.7 billion. (Oh yeah…the Dow fell 186 points or 1.37%, to 13,360 on the same day).
A bill now pending in the US Senate would tax publicly traded partnerships (that derive profits from managing other people’s assets) at the same tax rate as corporations are taxed (supposedly at 35%), abolishing the old loophole that inexplicably now gives such partnerships a huge tax advantage (a low, low tax rate of 15%). So the new law would more than double the tax rates for private equity firms like Blackstone.
But is Blackstone worried? Nah. Even if this bill eventually passes both houses, and is not vetoed by you-know-who, Blackstone would apparently receive a five-year exemption, since it filed to go public before the new bill was introduced.