“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Tuesday, August 21, 2007

The Revenge of the Jackasses

Yes the private equity guys are a bunch of greedy ruthless capitalist running dogs. The thing is, the ones who want to take their money and find a better use for it are far far worse.

Schumer expected to push for PE taxation

By Nicholas Rummell Financial Week
August 15, 2007

The movement to tax private equity and hedge funds just gained a powerful ally, as Sen. Charles Schumer (D-N.Y.) is expected to propose legislation raising the tax on carried interest on investment partnerships.

Private equity groups had counted on Mr. Schumer to oppose increasing taxes, and have frequently cited him as evidence of a schism among Democrats on the bill. Mr. Schumer is known for his close ties to Wall Street and hedge funds in particular. But by proposing such a bill, the New York senator may be trying to take the focus off private equity firms and apply it specifically to other industries, such as oil and real estate.

Mr. Schumer’s bill would be a lot like legislation proposed in the House, which would raise the tax on private equity carried interest from 15% to as much as 35%. The bill, proposed by Rep. Sander Levin (D-Mich.) and supported by several key Democrats in the House, including Charles Rangel (D-N.Y.), would impact investment management services to public partnerships. That legislation does not specifically mention oil and gas or real estate, but many have interpreted the legislation as applying to those industries.

On the other hand, Mr. Schumer is trying to explicitly apply the increased tax to those other partnerships, not just private equity. In a recent Senate hearing, Mr. Schumer said he wants to ensure that Wall Street firms are not singled out by tax bills. “If we’re going to change how we tax financial partnerships, we should treat oil and gas and venture capital and real estate and everything else the same,” he said at the July hearing.

Robert Stewart, a spokesman for the Private Equity Council, said that his organization “believes the current tax treatment of carried interest is the appropriate one,” and declined to comment specifically on Mr. Schumer’s planned legislation.

Still, other key Democrats are leery about boosting private equity taxes. Sen. Harry Reid (D-Nev.) has said he will postpone legislative action on PE taxes until next year. Mr. Reid has also been cited as an unlikely ally in taxing PE firms because of the recent interest in Hilton and other hotels and casinos by private equity firms. Some “blue dog” Democrats in the House, including Joseph Crowley (D-N.Y.), have met with private equity lobbyists and have expressed concerns about the bill.

Private equity is a hot target for lawmakers looking to raise revenue. A bill proposed in June by Sen. Max Baucus (D-Mont.) would eliminate the tax exemption on publicly traded partnerships that receive investment advisory fees. Mr. Baucus’ finance committee, which handles all tax issues in the Senate, is also looking at a proposal to increase taxes on loans made by hedge funds.

Such loans are often transferred to offshore funds after a waiting period, and are therefore free from taxation. A committee staffer said no specific legislation has been drafted yet.

The Ways and Means and Finance committees plan to hold additional hearings on private equity taxation after Congress reconvenes next month. Also pending is a congressional report on how much revenue would be generated by the House carried-interest legislation.


  1. Gee,
    Austin Bay agrees with General Garner that disbanding the Army was a disasterous decision.
    ...Viceroy Bremmer and A Jackassonian notwithstanding.

    Rumsfeld/DOE/Garner plan was torpedoed at the outset by State and CIA.

  2. Also known as "carry" The percentage of profits (generally 20-25%) that general partners receive out of the profits of the investments made by the fund. For instance, a $100 million fund raised from Limited Partners is invested into a portfolio of investments now worth $500 million. Assume that there have been profits from proceeds of $50 million. Limited partners would receive $40 million and the other $10 million would accrue to the general partners as their carried interest. ...

    A term often used to describe the interest that the founders will be given in a project. This is to recognize the value of the idea and concept behind an opportunity. It also should identify the non-cash contributions the founders have made to the project. Investors in a project should carefully consider the extent to which their investment, usually paid for with cash, will be diluted by the carried interest (usually issued for non-cash consideration)

    The general partner’s share of the profits generated through a private equity fund. The carried interest, rather than the management fee, is designed to be the general partner’s chief incentive to strong performance. A 20 percent carried interest – meaning that the remaining 80 percent reverts to the limited partners – has been the industry norm, although some firms now take 25 percent or even 30 percent, based on very strong performance on past funds.

    A fractional working interest in an oil and gas lease that comes about through an arrangement between co-owners of a working interest.

    The portion of any gains realized by the fund to which the fund managers are entitled, generally without having to contribute capital to the fund. Carried interest payments are customary in the venture capital industry, in order to create a significant economic incentive for venture capital fund managers to achieve capital gains.

    Properly constructed, carried interest provides a powerful opportunity to align incentives between the parties. Of late, there has been considerable interest in ensuring that the carried interest calculation maximizes these incentives. ...

    Carried interest or simply "carry" represents the share of a private equity fund's profit (usually 20%) that will accrue to the general partners, the rest goes to the investors.

    So, it seems that in the past the carried interest was taxed at the Capital Gains rate of 15%.
    If the rate were to increase to 35%, it seems to be moving to a earned income category.

    Matter of interpretation of income types and timing.

  3. If the Carry is "issued for non-cash consideration" then it should be taxed as earned income.

  4. Yeah, pay FICA on every last dollar!!
    As we tax and spend our way into oblivion, with a "fiscal conservative" at the helm.

  5. From the Moldy Oldie Archives,
    (don't know how or why Mat was involved,
    I report, you decide)
    Where, when, and on what days does Mat go poopie,
    (and how much longer does he have to live?)
    There is a natural bluff about 1,000 yards northwest of Qumran, blocking the view of the area behind it. The soil there, he said, "looked different" from that around it.

    Eventually, Tabor and Joe E. Zias of the Hebrew University of Jerusalem, an expert on ancient latrines, went to the site and took samples from the area and from other areas.

    "The earth was so nice and soft, while the rest of the desert was very hard," Zias said. "In fact, I broke my pick collecting control samples from the other areas."

    Zias sent samples to Stephanie Harter-Lailheugue of the CNRS Laboratory for Anthropology in Marseille, France. She found preserved eggs and other remnants of roundworms, tapeworms, whipworms and pinworms, all human intestinal parasites.

    Samples from the surrounding areas contained no parasites, while a sample from the stable area of the settlement contained a species of animal worms.

    "The evidence shows conclusively that the area was a toilet," Zias said.

    Had the waste been dumped on the surface, as is the practice of Bedouins in the area, the parasites would have quickly been killed by sunlight. Buried, they could persist for a year or longer, infecting anyone who walked through the soil.

    The situation was made worse by the fact that the Essenes had to pass through an immersion cistern, or miqvot, before returning to the settlement. The water would have served as a breeding ground for the parasites.

    The ritual cleansing "is a total immersion, which means that it gets in your ears, in your eyes and in your mouth," Zias said. "It is not hard to imagine how sick everyone must have been."

    The sickness is reflected in the Qumran cemetery, which had been partially excavated previously.

    "The graveyard at Qumran is the unhealthiest group I have ever studied in over 30 years," Zias said.

  6. More Jackasses at work:
    Colombia's Fall From Grace -

    WASHINGTON -- Free Trade on Hold, Yet the Worst May Be Over
    -- Colombia will be left to sit back and watch this fall as two of its neighbors -- Peru and Panama -- become the latest Latin American countries to enter into free trade agreements with the United States.

    As the nation regarded as the most favored by Washington's Latin American policy, Colombia expected better treatment. But for a terrorism-fighting, free-market-promoting and right-leaning ally in a left-leaning continent, Colombia is discovering that bilateral relations and U.S. rewards are not what they used to be.

    Since Democrats took control of Congress this year, the once pesky concerns of a minority party have become in-your-face demands concerning Colombia and its not-yet-ratified free trade deal.

    But by late spring, it was becoming clear that no effort by Uribe would be enough to satisfy Democrats seeking more to score political points at home than to establish sound foreign policy.

    When Uribe visited Congress in May, Democrats circulated harshly worded talking points questioning Uribe's leadership and the seriousness of his peace deal with paramilitaries. Later that month, Democratic senators sent a letter to Secretary of State Condoleezza Rice calling into question the entire relationship with Colombia and suggesting that Colombia may not be worth the expense of U.S. assistance. But the hardest blow came in June, when House Democratic leaders declared that they could not support a free trade agreement with Colombia.

  7. Winning friends and influencing people, doug. Sending trish to represent US all, there in Columbia.

    Last I had read, Panama and Peru were on the back burner, if they make the free trade cut, the Dems have given an inch.

  8. And why shouldn't those FICA taxes be collected?

    I'm gonna need that cash flow, someday, about a decade from now, to qualify for the free Panamanian residency visa.

  9. Sorry, my wife and all will have emptied the bottom of the barrel prior to you reaching the age of eligibility.
    ...or Illegitablity in your case old Land Baron of the Desert!

  10. 'wife and I,'
    ...although I may croak before bankrupting the system.
    At this rate.

  11. Just become a nomad, Doug, beats dirtying up the neighborhood with a latrine.

  12. This comment has been removed by the author.

  13. "“The team found neither ‘a single point of failure’ nor a ‘silver bullet’ that would have enabled the intelligence community to predict or prevent the 9/11 attacks,” "
    The single biggest point of failure in my book was Dr Rice ignoring ("the sky is falling") Richard Clarke, and having him demoted for having the audacity to yell fire in a tinderbox.

  14. Back on the farm, I had a hole in the ground, and used "Toilet Paper Sage" for TP.
    Great stuff:
    Soft fuzzy, succulent green leaves, made for the task, it seemed.
    Scented, Too.

  15. This comment has been removed by the author.

  16. How an entrepreneur makes money using duct tape

    Given the Chicoms record, scores of babies will die stuck to their car seats, their fate doomed for playing with daddies Wallet from Walmart.

  17. Crap!
    Oscar, (angel of death) the cat has been taken out, apparently by a bedpan.
    Outlaw Bedpans in Nursing Homes!
    RIP, Oscar
    Beautiful Animal

  18. Loud and Proud
    Things sure have changed.
    Thank Goodness for WOT and War on Drugs!

  19. Before the long non War commenced, he was
    Soul-Man Pootie Poot.

  20. The "Long War" is over, doug.

    The NorKs are soon to be off the terror list, while, shock of shocks, the Iranians have reached an agreement with the IAEA.
    The UN is satisfied that the Iranians are "cooperating"

    TEHRAN, Iran (Associated Press) -- Iran and the U.N. nuclear watchdog reached an agreement on a timetable to respond to questions over Tehran's controversial nuclear activities, both sides said Tuesday. The U.S. criticized the pact and urged the U.N. to consider boosting sanctions on Iran.

    Though Iranian and IAEA officials did not elaborate to the media, the agreement was expected to provide for easier inspection of Iran's nuclear facilities by the IAEA as well as urge Tehran to provide detailed answers on remaining questions over its nuclear activities.

    The agreement was announced at the end of two days of talks in Tehran between senior officials from the International Atomic Energy Agency and Iranian nuclear negotiators.

    "We have now in front of us an agreed working plan," IAEA chief of delegation Olli Heinonen told reporters. "We have a timeline for the implementation."

    All's well that ends well, the days of Axis of Evil are over.
    Only in Iraq, where US hard power was used does the Axis of Evil live, despite Saddam's demise.
    Where the International community's "Soft Power" was utilized the civilized world is now secure.

    See how easy it was.
    Peace through discussion, no blood for peace required.

  21. I got those Old Tyme feelings like I had prior to 9-11.
    Happy Days are Here Again!
    (EB'rs Stand at the Bar and Belt Out the song of celebration)

  22. I love the night shift. Good customers. No phone ringing.

  23. Doug's link. It seems the Soviets, and that is what they are, like their prospects under the jackasses:

    ..."Yesterday a senior Russian general warned the Czech Republic it would be making a "big mistake" if it permitted the US to use its territory. Yuri Baluyevsky, Russia's military chief of staff, said Prague should hold off any final decision on the shield until after next year's US presidential elections.

    "I do not exclude that a new administration in the United States will re-evaluate the current administration's decisions on missile defence," he said, after a meeting in Moscow with the Czech defence minister, Martin Bartak.

    Speaking at yesterday's MAKS-2007 international airshow, Mr Putin said: "Russia, as a state that has acquired new economic capabilities, will continue to attach special importance to high technology and development."

  24. You guys and I probly remember that memorable Evil Axel, WOT speech more vividly than W does now.

    Even tho it was him who read it, apparently with great conviction.

    Apparentses can be deceiving wrt Politicians, I guess.

    When will I ever learn?

  25. Little Pootie Wields a Big (and growing) Stick.

    Unlike here, where the end of History has re-occurred, people there respond as they always have.

  26. The Little Pootie-Poot that Could.
    Inspirational, Ain't It?

  27. Things are so Peaceful, we can start exchanging Recipes again!

    Enjoy the Prime of Life with Tart Cherries

  28. over the years, doug, we've seen the ups and downs of Never Forget.

    Well forgotten, now.

    While at the BC, poor Pierre has finally figured it out. Bush lied, but not the way it was trumpted by his political foes. That Mr Bush ran on character, yet the die hard loyalists, they all believed he was a deciever.

    But they took umbrage at those that called him a liar. Those that, to this day, believe that the Democracy Project is alive and well. Poor Pierre.

    I noticed that the NYTimes had a piece written by a group of NCOs from the 82nd Airborne, now leaving Iraq. No notice of it at the BC, but those NCOs echo my thoughts on the current state of affairs, in Iraq. Goin' to hell in a handbasket. Working, as we are, at cross purposes to our stated goals.
    The War as We Saw It is direct and correct in its' analysis of the situation, since they agree with me.

  29. ..but I think you may have a link blink.

  30. The "Long War" is over, doug.

    - Rat

    And not a moment too soon.

    We all needed a nap.

  31. That is a great link DR. It is going top-side.

  32. Right below this one, I hope:
    In times of Peace and Plenty,
    we can afford to indulge ourselves in High Fashion, and the like.

  33. Though it goes severely against the libertarian in me, over the past couple of years I've come to think of the government as a fortunate check on the emotional impulses of just about every right-wing chat room in the country.

    Thank God they don't have the opportunity vote for what they really want.

  34. It would be a shame to end that 40 year run of non-victories.

  35. Course, it wasn't just right wing chat rooms, to hear Austin Bay and General Garner tell it.

  36. Maybe the CIA has become
    " A Fortunate Check?"

  37. Either play to win, or don't play at all.
    Not that hard to figure out.

    Have the debates, take the votes, then follow through, one way or the other.

    But to engage and not follow through, that is the worst defeatism possible.

    Chickenhawks to the front.
    Mr Romney, father of four strapping young men, not a one has been in the country's uniform. Mr Romney, he got a deferment to spread Latter Day message in Europe, rather than serve the Republic. But today he will not discuss his religion. Chickhawk supreme.

    Mr Cheney, he had other priorities than military service, achieving wealth and power took precedence, for him. Chickenhawk squared.

  38. Only one full breasted beauty in the whole bunch. You wouldn't get away with that in Afghanistan. My traveler, Rory Stewart, finally was in a room with a woman for a couple of minutes amongst the Hazara, descendants of Genghis Khan's people, now sorta mongolian shia, but only for a moment. Everywhere else all the women are out of sight, out back, until called. What a hell of a place. Nothing changes there I tell you, no matter what happens in Kabul.

  39. I started this war horrified by the left. I'll end it thoroughly disgusted with, and actually frightened by, the right.

  40. I thought Mitt had five sons. They're all working on the campaign, Rat.

  41. I started out horrified by the muslims, and still am.

  42. I agree with Trish. I hate them all.

  43. And the only reason Rory got to talk to the Hazara woman was in the old days of Khan, the women had a prominent place in the yurt. A cultural holdover from that. Backwoods Afghanistan is unbelievable. Yet all in all they showed a type of hospitality, but only because he was non threatening. Some didn't know where Britain was, though they had heard of the world trade center. The women mostly hadn't even been out of the village. Ever.

  44. Have your community Profiled for drug use.

  45. The Muslims are just being used as a Bumper Sticker, AlBobAl.
    Wake up and enjoy the
    Peace in our Time.