By now I'm sure you've all heard about the Blackstone Bill being put forth in Congress. I'm not going to rehash the details about it but in short, the bill would increase Blackstone's tax rate as a public partnership. In the wake of this news, Fortress' stock has taken a hit and it is projected that Blackstone's valuation will be shaved by 15 to 20%.
This is both happy and sad news to me. It's sad that the governing body of this great country clearly has to go after the private equity industry in what appears to be an unjustified outrage over what I consider justified compensation and valuation for private equity firms. In an effort to find more revenue, the IRS needs to pick some deep pockets so it is going after private equity.
I think in the short run, it may work to increase our government's revenue. In the long run, there is no chance in hell that the private equity industry will succumb.
The happy news is that this shows that the people that we have elected to be in Congress and run our government actually are alive and breathing and are not just lame ducks. They are actually trying to increase revenue. Maybe a better idea would be to cut expenses?!
This all reminds me of an old controversy between wealthy democrats and wealthy republicans. The wealthy republican would not be happy that the wealthy democrat was voting for tax increases. The democrat response is that if you are wealthy then it doesn't matter what the tax rates are because you know how to avoid them.
Thus, if our dinosaur of a government wants to come after private equity partnerships, it will always be several steps behind.
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