Private Equity “Money for Nothing” Tax Game as An Example of Elite Lawlessness

Posted on December 16, 2014 by Yves Smith

Most members of the great unwashed public, when they hear about unfair results of the tax code, like Warren Buffet’s secretary facing a higher tax rate than he does, or private equity and hedge fund barons paying capital gains tax rates on labor income, assume that those outcomes are the result of a combination of the rich getting the tax code changed over time or succeeding in preserving the exploitation of loopholes that should have been closed ages ago.
But there is another category of tax games that are not discussed much in polite company, that of outright abuses. What is disturbing about that behavior is that it has not only become increasingly common, but members of the bar, including those at white shoe firms, are enablers.
A new paper by Gregg Polksy, A Compendium of Private Equity Tax Games, focuses on two private equity tax dodges involving monitoring fees and management fee waivers. It’s important to recognize that Polsky is no ordinary critic. Not only is he a professor of law at University of North Carolina, but he was Professor in Residence in the IRS Office of Chief Counsel.http://www.nakedcapitalism.com/2014/12/private-equity-tax-games-another-example-elite-lawlessness.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29