What is in a Word

It is interesting to see economists talk about taxes in the private equity world. Perhaps they will pose theories of astrophysics next.

The problem is that "it all depends". In the simplistic sense if a company pays a dividend and it is taxed at 15% and the company pays 35% tax then indeed the total was taxed at 50%. The problem is no private equity works quite that way. Especially for the general partner types who have really little at risk.

For example, consider a general partner who puts nothing at risk, and a company which has massive tax loss carry forwards which is sold for say $100 million. The funds get distributed to say the PE company. It is a capital gain at 15% depending on what is returned. No 35% was ever paid, just a greater fool found to buy it. That by the way is the PE game. But without the PE player the company may most likely have collapsed.

So how should we view this? Well it is really very complicated and all these economists are apparently clueless finding one scenario after another to justify their conclusion, ad hoc propiter hoc.

How should we look at it? Well each case is separate. It is not simple and it cannot be simply explained by some smart Prof trying to make their point. Details count, welcome to the real world folks!