Blackstone’s Tax Arguments
Blackstone, a private equity firm that recently went public, has a huge tax problem. Currently, Blackstone pays taxes at a rate well below that of most U.S. Corporations. Congress may be about to change this.
As Congress debates whether to increase the taxes Blackstone and other (public) private equity firms pay, Blackstone is not standing still. Blackstone is trying to pressure Congress into letting them keep their sweetheart tax deal.
The firm argues that increasing taxes is counterproductive. One of the funniest arguments the firm has come up with is that increasing their taxes will reduce the value of their firm, thus reducing the capital gains taxes realized by their investors.
By that same logic, if taxes on every corporation were cut, the values of those firms would go up, increasing capital gains taxes. The argument is not unique to Blackstone and the private equity industry, in general.
The reason for not letting a company pay less than it’s share of taxes is obvious. A lower tax rate is a subsidy, artificially increasing the amount of capital into that particular industry. Do we really want to subsidize private equity? I can think of many other industries I would rather subsidize.
