New column: Blackstone’s taxing IPO

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My latest column is in the issue of the magazine with Rupert Murdoch on the cover and online here. It begins:

On June 22, shares in the private-equity firm Blackstone Group began trading publicly on the New York Stock Exchange. By late afternoon, CEO Stephen Schwarzman’s 23% stake in the firm he co-founded was worth almost $9 billion; he also pocketed $700 million cash from the deal.

The same day, several high-ranking members of the House Ways and Means Committee introduced legislation to make Schwarzman and Blackstone pay a lot more in federal income taxes than they do now.

Coincidence? Naah. The astounding riches made public for the first time when Blackstone filed for its stock offering are a big reason this is shaping up to be a hot summer for private equity. Key members of the Senate Finance Committee have also proposed tax hikes, hearings are planned on both sides of Capitol Hill, and private-equity firms are gearing up for a lobbying fight.

But Blackstone-induced “class envy,” as TV pundit Larry Kudlow has called it, is not the only reason Congress has suddenly developed an interest in the subject. Nobody proposes touching Schwarzman’s big founder’s stake, which slipped below $8 billion within days as Blackstone’s stock price dropped. At issue instead is the mere $398 million he made as CEO last year, much of it in carried interest on Blackstone’s investments. And the manner in which carried interest is taxed is enough to make even a megamillionaire corporate CEO envious. Read more.

The Kudlow class envy quote is from this mostly ridiculous NRO column, which I’ve been meaning to comment on for a few days now, but just can’t figure out where to start.