Green-Eyed Newsweek Calls for Tax Increase on Fund Managers

Using disparaging comments to stoke class warfare, Newsweek called for higher taxes on the “super rich” in the July 23 issue. The magazine called private-equity partners “Masters of the Universe,” “the true aristocrats” and remarked snidely that “even their secretaries, it seems, have English accents.”Private-equity firms, like Blackstone and KKR, buy publicly-traded companies, make them private, put in new management to make them more efficient and then sell them or “exit” through an initial public offering (IPO) for a profit.The introduction to the story was filled with stereotypes about some of Wall Street’s wealthiest – scorning everything including “their English tailored suits, country estates and oriental rugs.” But, co-authors Evan Thomas and Daniel Gross stated that these private-equity managers are not only trying to amass money, they are seeking power.

“Private-equity partners are not just in it for the money (though the successful ones make tons of it), but for the power to reshape whole industries,” the article said.

The piece attacked the structure of the U.S. tax system for not taxing private-equity partners more. “The very rich in America pay taxes at a lower rate than most working people, and, due to a wrinkle in the tax code, private-equity partners enjoy some of the lowest tax rates of all,” Thomas and Gross wrote.The Newsweek duo also went after the “current poster boy – or target” Steve Schwarzman, CEO of the Blackstone Group private equity firm. It was not the first time writer Daniel Gross had attacked Schwarzman – in June, he wrote an editorial called “The Golden Ass” about Schwarzman for the ultra-liberal Slate.com, an online publication owned by the Washington Post. Yet, Newsweek allowed Gross to write a supposedly objective news story about the same man.In his Slate commentary, Gross accused Schwarzman of “flaunt[ing]” his fortune and “gam[ing]” the system. He also took a dig at the CEO’s spending habits, labeling him a “boisterous consumer who spends like there is no tomorrow.”Newsweek was clearly on the side of tax hikes for the “superrich.” The magazine called those who would increase taxes “reformers.”But as CNBC’s Erin Burnett pointed out on NBC’s July 17 “Today,” the wealthiest Americans pay far more in taxes than everyone else.

The top 1 percent of [the richest] Americans, Matt, pay 30 percent of taxes in this country,” said Burnett. “The bottom 20 percent of wage earners pay only 5 percent. So while we do have a lot of income inequality, it is fair to say we still have one of the most progressive systems in the world.”

 

Julia A. Seymour
Julia A. Seymour
Julia A. Seymour is the Assistant Managing Editor for the MRC's Business and Media Institute.