ACU OPPOSES THE BAUCUS-GRASSLEY TAX INCREASE ON PUBLICLY TRADED PARTNERSHIPS

Major Tax Increase Would Punish Capital Markets and Investors Big and Small

ALEXANDRIA, VA—The American Conservative Union (ACU), the nation’s oldest and largest grassroots conservative lobbying organization, today declared its strong opposition to S. 1624, legislation offered by U.S. Senators Max Baucus (D-MT) and Charles Grassley (R-IA) that would more than double the tax rate on publicly traded partnerships.

“Far from closing a ‘loophole’ as proponents claim, this bill will have a far reaching impact on our international competitiveness, disrupt capital markets, and allow Congress to willfully act as a securities regulator and market manipulator,” said J. William Lauderback, ACU’s executive vice president.  “Not only is this legislation a major tax increase, it will actually lessen tax revenues as other partnerships will choose to avoid going public, possibly even reincorporating abroad—none of which is good for the national economy or our capital markets.”

The legislation is largely viewed as a response to news of several pending and potential Initial Public Offerings (IPOs) by private equity firms seeking to join the public equities markets, yet its impact would ripple across countless industries. Additionally, the legislation was offered without any Congressional hearings or review by government agencies. In response, the conservative free market community has pledged its opposition.

“If the goal is to punish an industry that is currently limited to large institutional and wealthy individual investors, or to provide greater financial transparency, this takes the exact opposite approach,” continued Lauderback  “What better way to address both concerns and usher in greater economic growth than having such partnerships become publicly traded?  Such a course would allow investors big and small to benefit from the high returns being realized by private equity firms while making such partnerships public and be subject to government oversight.  We should be encouraging, not discouraging such efforts.”

Congress should take note that of the dozen or so largest IPO’s in the world set to take place this year, only one will be issued in the U.S.  At a time when U.S. public equity markets are losing market share to London and other regulatory and tax advantaged jurisdictions because of Sarbanes-Oxley regulations, Baucus-Grassley would only further push our public equity markets into irrelevance at the expense of all publicly traded partnerships and mainstream investors.