The right friends

27 April 2007 By David Vise

A new critique of the industry is circulating on Capitol Hill. Buyout shops are worried it will embolden politicians to raise their taxes. But that’s unlikely. Private equity has an ace up its sleeve: the real estate industry, which enjoys similar tax breaks.

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The 1.8 millionmember Service Employees International Union released a critique of the private equity industry this week. It argues that employees need to share in the financial opportunities created by the buyout shops. "We need to take the conversation about the impact of private buyouts out of the boardrooms and financial pages and into the living rooms and communities of America," said Stephen Lerner, assistant to the president of the union.

The buyout industry's new lobbying group, the Private Equity Council, rubbished the report. "Research shows that private equity investment often results in longterm employment growth and enhances the economic viability of a business to the benefit of all stakeholders," said Doug Lowenstein, president of the group.

"We're looking at this area of the tax code, among others this year, to see whether it's treatment of income is appropriate and fair to all taxpayers," said an aide to Sen. Max Baucus, chairman of the Senate Finance Committee.

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