From Long Term Wealth Redistribution to Short Term Economic Imprudence, Congressional Liberals Pursue Their Tax Agenda

The tax overhaul proposal announced by House Ways and Means Committee Chairman Charles Rangel will add $3.5 trillion dollars in new taxes by increasing current taxes and allowing the Bush tax cuts to expire, according to American Conservative Union Executive Vice President Bill Lauderback.

 “What Chairman Rangel and Speaker Pelosi have proposed is not only the largest tax increase in American history, but it also marks a conspicuous move by the liberal dominated Democratic Party to embrace the fundamental aspects of  Marxist-Leninist inspired wealth redistribution,” said American Conservative Union Executive Vice President Bill Lauderback. “In one respect, perhaps the American people should thank Chairman Rangel for foreshadowing the true intentions of his party should the White House and Congress be controlled by the Democrats in January 2009.”

Lauderback said while no one in congress anticipates action on the total Rangel-Pelosi proposal this year that was precisely the point of introducing it – to draw attention away from the real current tax bill Chairman Rangel is expected to introduce in the next few days.

The Real 2007 Democrat Tax Bill

According to The Wall Street Journal (Tax Blueprint Mixes Pain, Gains, October 26, 2007), the legislation Rangel will soon introduce “would break out two proposals from his larger package: one that raises taxes on carried interest, a slice of private-equity and venture-capital managers' compensation taxed at the 15% capital-gains rate, and another to limit hedge-fund managers' ability to defer taxes on their pay by holding it offshore.”

By increasing taxes on venture capital partnerships, private equity funds, real estate partnerships and traditional investment structures designed to start, buy or grow new enterprises, Chairman Rangel and his Democrat cohorts would be penalizing the nation’s predominant growth engine.

Lauderback said additional taxes on carried interest would adversely affect many sectors of our economy, whether it is a restaurant or dry cleaners, buying a distressed company with thousands of employees or financing a development in an economically distressed region. Dramatic impacts on entrepreneurs, innovators, communities and retirees could be expected.  These sectors have been responsible for creating millions of jobs and continue to serve as the foundation of American innovation.

“By raising the tax on capital growth a staggering 133% (from the current 15% rate to the 35% corporate rate) the bill Speaker Pelosi and Chairman Rangel will try to pass this year would stifle innovation, throttle job growth and wreck havoc on the U.S. economy,” Lauderback said.  “Essentially, the House Democrats’ bill serves to penalize the risk taker who seeks to open his own business or create investment opportunities through their own sweat equity; and this, despite the fact that many of these enterprises are engaged in the very types of innovation needed to address some of our most profound national challenges, including the development of alternative energy resources, biotechnology, health care and sustainable urban development.”

Stifling Economic Growth 

Private equity has been a catalyst for economic growth and resurgence, retirement security and non-profit investment.  Private-equity firms are valuable sources of liquidity, particularly for troubled companies:

• Two-thirds of the earnings growth in private equity-owned companies comes from business expansion – translating into job growth and additional tax revenues.
• Employment levels at private equity owned companies have been found to be the same or higher at exit compared to acquisition in about 80 percent of all U.S. deals.
• Private equity firm Cerberus recently garnered headlines when it paid $7.4 billion to purchase an 80 percent stake in Chrysler.  More typical are private-equity firms investing in young companies with high potential, but in need of capital and management expertise to help them grow.

Punishing government retirees

As the public equity markets have underperformed in recent years, public pension funds have invested heavily in private equity and other managed partnerships as a means to meeting their obligations to retirees.

“There is a reason that large state public employee pension funds have flocked to private equity funds – the continual returns and success of these funds and the companies they managed have helped to ensure retirement funds remain solvent and that their members enjoy the full fruits of their investments,” Lauderback said. “Punitive measures on private equity will have a direct impact on the retired public employees in Chairman Rangel’s and Speaker Pelosi’s congressional districts as well as similar retirees throughout the nation.”