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Jun.16

10:01 AM ET

Saturday, 16 Jun 2007

Target the Super-Rich?

Topics:Blackstone Group | Congress | Laws and Legislation | Wealth | Private Equity

Blackstone Co-Founder Stephen Schwarzman
Blackstone Co-Founder Stephen Schwarzman
It's getting tough to be very, very wealthy. This week, the men who stand to make billions when private-equity firm Blackstone goes public may have attracted just a bit too much attention with headlines like Blackstone Founders Prepare to Count Their Billions and Blackstone CEO Collects $400 Million Pay (roughly double what the CEOs of Wall Street's five biggest investment banks made last year ... combined.)

Now there's a bi-partisan move in Congress to strip away tax benefits from Blackstone, and other private equity firms like it, when they go public. The prospect of being taxed as a partnership rather than a corporation is one of the factors contributing to Blackstone's big payday.

Of course, it's hard to feel too sorry for the super-rich, and that's exactly what makes them an inviting political target. Recently, as the Wall Street Journal's David Wessel reports, even supporters of globalization, a massive wealth-generator overall, argue that a growing income gap is politically aiding and abetting protectionists and threatening future free trade reforms.

The Heat asks: Should Washington target the super-rich?

Here you can find the facts and opinions you need to make up your own mind . . . and tell us what you think.

News: Blackstone Says Tax Changes Will Hurt Value (June 15)

News: Blackstone CEO's High Profile Concerns Rival Firms (June 15)

CNBC.com Web-Only Video: Reporter's Notebook discussion on the Blackstone controversy with Managing Editor Tyler Mathisen and Senior Economics Correspondent Steve Liesman (June 15)

Kudlow & Company Video: Kudlow on Taxing Private Equity (June 15)

Closing Bell Video: Targeting Private Equity (Part 1) and Targeting Provate Equity (Part 2) (June 15)

Power Lunch Video: PE Taxes with Eamon Javers, BusinessWeek Washington Correspondent and CNBC's Melissa Lee, John Harwood and Bill Griffeth (June 15)

Morning Call Video Discussion: Bullseye on Blackstone with Andrew Ross Sorkin of the New York Times, Breaking Views U.S. Editor Rob Cox and CNBC's Michelle Caruso-Cabrera (June 15)

Morning Call Video Debate: Washington vs Wall Street with Wharton professor Thomas Donaldson and Stephen Moore of the Wall Street Journal's Editorial Board (June 15)

Squawk Box Video: Taking Aim at Private Equity reported by CNBC's Melissa Lee (June 15)

Squawk Box Interview: Where Are the IPOs? with CNBC's Becky Quick and Private Equity Week editor-at-large Dan Primack (June 15)

On the Money Video: Blackstone in the Crosshairs with Andrew Ross Sorkin of the New York Times and CNBC's Melissa Francis (June 14)

News: Proposed Legislation Could Double Blackstone Tax Burden (June 14)

News: CNBC's Gasparino - Several Private Equity IPOs Likely After Blackstone (June 11)

Play-By-Play: AFL-CIO Wants Blackstone to Register as Investment Company (June 14)

Financial Times: Blackstone faces IPO challenge in Senate (June 15)

New York Times: Bill Would Raise Taxes on Public Equity Firms (June 15)

The Hill: Legislation tackles partnership tax loophole (June 15)

Committee on Finance: Baucus-Grassley Bill Addresses Publicly Traded Partnerships (June 14) and Text of Legislation Regarding Publicly Traded Partnerships (June 14)

Wall Street Journal (subscription required): How Blackstone's Chief Became $7 Billion Man (June 13)

ABC News: How Much Is Too Much? (June 13)

Melissa Lee's Power & Money Blog: Steve Schwarzman - Too Rich or Not for Congress? (June 15)

The Daily Reckoning: Blackstone IPO - Founders Count Billions as Retail Investors Get Pinched (June 13)

FT.com: Blackstone's Riches (June 11)

Dan Primack on peHUB: The Blackstone Bill (June 15)

The Heat has a strong faith in the free market. It bristles when it hears anyone say someone else is "too rich" or being paid "too much." As long as a wealthy person didn't get rich by breaking the law, there should be no such thing as having "too" much money.

But there's a difference between what should be and what is. Now Wall Street is making even the Heat think twice. As that classic of Economics 101, the Ultimatum Game, demonstrates, if the winners get "too" far ahead of the losers, those losers will stop playing, even if they would be better off staying in the game.

The deep human belief that things should be "fair" is strong and can't be ignored. Politics can't be ignored. Washington does need to step in and save Wall Street from its own excesses by narrowing (but, of course, not eliminating) the gap between the super-rich and the rest of us. If it doesn't, everyone could suffer as protectionists and anti-capitalists are unduly strengthened by a populist backlash against those with "too much" money.

Should Washington target the super-rich?

Questions? Comments?

Should Washington target the super-rich?

Email us at:

"Easy solution: tax all income, whether dividend, capital gain, wage, or other, at the same rates we have now. I'm not saying a flat tax. For those who say that will lead to fewer jobs from raising the capital gains and dividend tax rate, ever hear about a stock price or dividend going up when layoffs are announced?" - Lee, Ohio

"Remember, these firms do not have to go public. There are enough private investors (such as myself) to invest. And they can go oversees with the filing of one document to almost completely leave the U.S. tax system. If we do, say goodbye to about $12.4 billion in tax money gone to another country's treasury." - Walt

"Why tax any individual? The Federal Reserve just creates money out of thin air anyway. Just print it or make the appropriate digital entries. Individual taxes don't even cover the interest on the national debt and raising rates won't do a damn bit of good." - Jon

"Washington already taxes the super-rich. It's the dummies in Washington and at the state and local levels who have imposed the highest corporate tax burden among all the industrialized nations. So Blackstone will actually help us become more competitive by reducing costs... Become more competitive, compete with imports, reduce balance of payments. Isn't this what we want? - Andrew, New Hampshire

"Listening to someone say that the rich are getting out of taxes, regardless of how obscene the amount is, does not understand that capitalism rewards the hard working, intelligent and the lucky. To blatantly describe how rich someone should be puts severe limits on the today's economy." - Jack, Virginia

"I believe it's difficult for the majority of us to understand why a head of household who brings home the bacon needs several million dollars per year to provide for a family. The rest of us get by on so little and what we have we have worked hard for. Why would a family need their own boat and three or four homes? It makes no sense to the so-called middle class. The viewer who referred to 'obscene wealth' had it right on the money! Look what you can buy with money to burn: a daughter like Paris Hilton. " - Suzanne, North Carolina

"How dare someone be too successful? So Schwartzman's making obscene money, why should he be penalized? He's not sitting on the money, he's out spending the money in the economy, and others realize those profits. Congress's idea of taxing anyone who's successful is absurd .. Blackstone should just tell Congress 'up yours' and take their IPO to the London exchange." - Carl, California

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