Following on the heels of Toast's patriotic support for taxes paid by individuals comes the most nauseating business article I've read in years (you will need to login at NYTimes.com to read it). Written by David Cay Johnston at the New York Times, it discusses the crafty use of "Tax Loopholes" by Blackstone to do what's described in the article as the following:
“These guys have figured out how to turn paying taxes into an annuityNot familiar with an annuity? What it basically means is, these guys pay taxes, then get that back that money in parts annually with a return on that investment. They figured out a way to IPO, pay some taxes, then deduct some value such that the deductions save them future taxes save them more than the taxes they've paid.
Fucking Bastards.
Lee Sheppard, a tax lawyer who critiques deals for Tax Notes magazine and has studied the Blackstone arrangement, said it was a reminder of the disconnect between the tax debate in Congress and how the tax system actually operates at the highest levels of the economy.
“These guys have figured out how to turn paying taxes into an annuity,” Ms. Sheppard said. “What people don’t realize is that the private equity managers, the investment bankers, all the financial intermediaries, are in control of their own taxation and so the debate in Washington about what tax rate to pay misses the big picture.”
Exactly. These douchebags are just like the first guys that realized, "Hey, you know, we open an office in Aruba, call it the headquarters and all of a sudden, those profits are actually made overseas! Whoo Hoo!".
So for the poor schlubs like me who were scratching their heads at this point in the article because they've never seen the "turn taxes into annuity" button on TurboTax, here's the play-by-play by the outstanding Johnston.
Blackstone’s tax maneuver hinges on its use of good will, an accounting term for the value of the intangible assets, like a well-known brand name, that are built up by a company over time. That value is part of the reason a company is worth more than the sum of its physical parts, like buildings and equipment.
Individuals who create good will cannot deduct it. But when good will is sold the new owners can because its value is assumed to erode. The Blackstone partners sold the good will from their left pocket to their right.
In simplest terms, the Blackstone partners paid a 15 percent capital gains rate on the shares they sold last month in the initial stock offering to outside investors (those shares represented a stake in the Blackstone management company, not its funds).
Blackstone then arranged to get deductions for itself for the $3.7 billion worth of good will at a 35 percent rate. This is a twist on the “buy low, sell high” stock market adage; in this case it would be “tax low, deduct high.”
Goddamn. So, while my boy Toast is doing his best to rightly make people realize that paying taxes is a patriotic act, some fucking white collar bastard tax attorney is making 700 bucks an hour trying to figure out how to make a bunch of billionaires kajagoogoo-illionaires.
It's to this $700 per hour, Mercedes CL 600 driving, republican voting bastard that I'd like to now speak.
Dear sir or madam, you are a financial terrorist. You are a traitor to your country. The first dollar you saved that billionaire came right from Walter Reed, where it could have used to help a true patriot. The next came from a family who's breadwinner had to leave his job so that his family's income could drop far enough that they'd qualify for Medicaid and finally be able to treat their daughter's chronic illness. The next one would have helped pay for a copy of "My Pet Goat" for an inner city kid who was trying to learn to read and couldn't swing a presidential reading. But hey, maybe he'll be good at basketball or be a rapper.
Get the picture? You are the problem. Sure the system is there to be abused. But that's like saying, "Hey, there was no alarm system. Why shouldn't I have stolen that pack of gum?" Because it's wrong, that's why. You're smart. You're good with numbers. You know that every dollar you save your billionaire client either is later taken from a citizen who needs it or is borrowed from a foreign government to finance loopholes like this one. You know this. And still, you get up in the morning drive to work and try to thwart your governments efforts to fund it's activities. It's wrong. Go work at McDonalds and get a real job. You're a parasite. Like one of those little sucking shitball fish attached to the bottom of a shark.
Why don't I blame the billionaires themselves? Because, it's like blaming a shark for being a shark or Tony Montana for sticking his head in a mountain of coke. They are what they are. A few of them, (Gates and Buffett come to mind immediately) realize how unique they are and how ideally suited they are to make an enormous difference in the world. The rest? They just want to wake up each morning with more money than when they went to sleep. But those tax attorneys know better. And our society deserves better. So, while I'd love to give these tax attorneys a columbian necktie just like Tony Montana would, I won't. But since I'm being the bigger person here, can't we please close this loophole? And while we're at it, the one that encourages small business owners to buy Hummers? Thx in advance.
Sidebar: Reading this article reminded me about how truly great David Cay Johnston is at writing about this somewhat dry subject of tax policy. And I was reminded how I never picked up his book "Perfectly Legal:The Secret Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else" I always meant to pick it up because Johnston did such a good job covering the Bush-DeLay tax cuts of th 2001-2004. I remedied that. Looking forward to reading it.
