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How the Democrats Made a Bundle From Private Equity

Mike Kemp | Getty Images

I've often referred to Democratic threats to eliminate the capital gains treatment of carried interest as a shakedown.

Now Mother Jones shows just how lucrative that has been for the political class.

"2007, as it turns out, was something of a watershed for private equity lobbying: In that year, lobbying expenditures for the industry practically tripled," Mother Jones reports.

That, of course, was the year the Democrats took over the House and Senate.

"After Democrats won control of both the House and the Senate in the 2006 midterm elections, they advanced several pieces of legislation that threatened to end this lucrative quirk of the tax code and other tax policies that favor the rich," Mother Jones says.

So that led to an epic filibuster in which minority Republicans used every trick in the rule book to undermine the taxes, right? And then George Bush vetoed bill after bill raising taxes on carried interest.

Oh. No. That's not what happened at all.

Instead, Democrats just never passed legislation raising taxes on private equity firms. Why'd they do that?

Well, another Mother Jones article explains: "During the last three election cycles, Bain [Capital] employees have given Democratic candidates and party committees more than $1.2 million. The vast majority of that sum came from senior executives. Republican candidates and party committees raised over $480,000 from senior Bain executives during that time period."

That's how this works. Threaten the tax hike to elicit the contributions and spending on lobbyists, many of whom are former staffers of the lawmakers.

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