Although Hillary Clinton claims to adamantly support tax “fairness,” she can't make up her mind about whether Wall Street barons should have to pay the same tax rate as the regular workers she loves and the corporations she loathes.
Right now, when private equity and hedge funds go public, the funds and their managers only have to pay a 15 percent tax on their millions in profits. That's a lot less than the top rates of 35 percent for corporations and 33 percent for individuals. Doesn't sound fair, does it?
But Hillary, whose Web site espouses justice and fairness by “leveling the playing field and reducing special breaks for big corporations” and “ensuring that corporations pay their fair share of taxes” hasn't come out in support of legislation co-sponsored by Barack Obama and backed by John Edwards to increase the tax rate on hedge funds and private equity firms to 35 percent.
She's still thinking about it.
And we're not talking about peanuts here. The dollars involved in these transactions give new meaning to the term “big bucks.” Take a look at the public offering on one such firm, Blackstone. Its IPO later this month is expected to net $4.75 billion! And two of the partners alone will have made almost $10 billion in the transaction. According to Business Week, top partners Stephen Schwartzman and Pete Peterson will personally make billions: “Schwarzman, 60, will own 24 percent of Blackstone after the IPO, a stake that would be worth about $7.73 billion. Peterson, 80, will get at least $1.88 billion when he sells all but 4 percent of his interest in the firm.”
And that's not all: the Blackstone folks are not even satisfied with that amazingly low and preferential tax rate of 15 percent. Apparently they've even concocted a plan to avoid paying taxes on $3.7 billion of the $4.75 billion profit.
Think about the difference between Mr. Peterson's taxes on the $1.8 billion at the current 15 percent rate and the proposed 35 percent rate: that's $270 million vs. $630 million - a $360 million difference.
That's why the hedge fund and private equity firms have been deluging Congress with their lobbyists and their money.
So why isn't Hillary jumping on the Obama/Edwards bandwagon? This is her kind of issue, isn't it? Her Web site also promotes ... “reforming the governance of corporations and the financial sector. It is inconsistent with our values to allow CEO pay to skyrocket while workers' wages and benefits are under threat.”
Guess how much Blackstone's CEO, Mr. Schwartz, made in 2006? FOUR HUNDRED MILLION DOLLARS!
And Hillary still has to think about it.
Maybe it's because she has received more contributions from hedge funds in her senate campaign than any other member of Congress — $144,460 in the period from January 2005 to June 2006 alone. And another $160,000 in the first six months of her presidential campaign.
That's definitely something to think about.
But there's more: Hillary has a family interest in the hedge fund industry — Chelsea Clinton works for the Avenue Capital Group, a $12 billion hedge fund in New York.
According to Marc Lasry, founder and managing partner of the firm (and a long-time contributor to Hillary), he thinks that hedge funds make too much money: "Obviously, what we make is absolutely obscene. I think it's too much. I'm not saying it's wrong ... (but) trust me, the dollars are still obscene."
Most people would agree with Mr. Lasry.
It's time to change the rules.
Hillary Clinton should stop hedging and join Edwards and Obama in seeking the justice and fairness that she claims to be pursuing.