Sunday, June 18, 2017

A Washington Billionaire With Self-Image in Mind

By A.J. Liebling
Meta-Content Developer with
Ida Tarbell in Washington

Whoever said “With great wealth comes great sucking-up” was proved right again by today's New York Times Not the News of the Week in Review Section.  At the bottom of the leader page is a dispatch from the Times's Editorial Observer headlined “A Washington Billionaire With More Than Self-Interest in Mind.”

Who is this paragon and what's on his mind?  His name is David Rubinstein, and as the Times accurately states, he's got a pantload.   Did he make his fortune by inventing refrigerator containers with attached lids (hell of an idea, by the way), gorditas stuffed with tacos, or a drug that cures a disease that doctors don't believe exists?

Of course not, people.  He made his money the good old fashioned American way: flipping assets and finagling, as the head of a private-equity partnership known as the Carlyle Group, named after his father, Carlyle Rubinstein [Interns, please check this – Ed.].

In the words of noted philanthropist David Rubinstein
“I seen my opportunities and I took 'em”
And what has he done to merit 15 slurpy column inches of prime New York Times paper real estate?  He's giving away some of monumental gains to charities of his choosing.  Not surprisingly, as with most plutocrats, he chooses charities that benefit him and his ilk: elite universities where dim bulbs like Jared Kushner can gain an admission letter for as little as $2.5 million, cultural institutions that put on plays and operas they like, and tertiary-care hospitals that provide the complex health care they regard as their right, if no one else's.

Where doesn't the money go?  It doesn't go to public schools and colleges who prepare those of modest means to toil for zillionaires like Rubinstein.  It doesn't go to provide art and theater programs to those who can't afford Kennedy Center box seats.  And it doesn't go to providing primary health care to the poor and underserved, like aliens without immigration status, because if they didn't know how to operate the lawn tractor, they shouldn't be cutting Rubinstein's putting green.

The reason it doesn't go to alleviating the plight of the poor is not just a matter of Rubinstein's choice of charities.  It's because his wad of dough was augmented by the shady tax loopholes that he and his bought-and-paid-for lawyers, accountants, and congressmen drilled into the Internal Revenue Code.

To take the most flagrant example, when you or I toil for money, we pay taxes at ordinary income rates.  If we are so fortunate as to get a bonus we pay those taxes on the bonus, too.  But if you have structured your empire of finagling as a partnership, your bonus for exceeding whatever return target you negotiated with your marks is taxed as a capital gain because it is paid as a distribution on a partnership interest.

Is there any rational basis for this scam?  No.  Does it serve a larger purpose?  Other than to make Rubinstein rich enough to buy a column in the New York Times, no.  Why then does it exist?

Care to take a wild guess?  Time's up.  We'll let our friends at ProPublica tell you the not very surprising answer:

Until recently, relatively little attention had been paid to one source of Rubenstein’s wealth, which he has quietly fought to protect: the so-called carried-interest tax loophole. The tax break has helped private equity become one of the most lucrative sectors of the financial industry. Since the end of the recession, private equity has reported record profits, and at least eighteen private-equity executives are estimated to be worth $2 billion or more each.  . . .

One name for the tax break is the “hedge-fund loophole,” but hedge funds benefit much less than private equity does, because their trades tend to be too short-term to qualify for the low capital-gains rate. At a Credit Suisse forum in Miami, in 2013, Rubenstein said of private equity, “Carried interest is really what the business has historically been about — producing distributions for your investors from good sales and IPOs … and getting 20 percent of the profits for yourself.” He went on, “That’s how we’ve really grown our business.”
The ProPublica article went on to note the hypocrisy of lauding rapacious tycoons for their charitable gifts without noting that their fortunes were made in part on stiffing the government of the taxes it needs to support programs that benefit even more people than the National Archives (one of Rubinstein's pet charities).

And how was the New York Times supposed to know about a piece that appeared online over a year ago?  It's not like it was published in a magazine well known to most Times Editorial Observers (whatever they are).  As the note on the ProPublica website says  “This story was co-published with The New Yorker.”

We're actually not even giving you the full wet smackeroo, because the point of the article was not just Rubinstein's magnificence, but his efforts to “rekindle good will” by throwing dinners at the Library of Congress (owned by us) to which you and I were not invited.  According to Rubinstein, the dinners are intended so that legislators are “given the opportunity . . . to come together.”

Surely it is a coincidence that one matter that legislators have come together on is preserving tax breaks for David Rubinstein and his fellow finaglers.  We know that every legislator has his price. We're a bit surprised that the Times is willing to fawn over this gonif for free. 

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