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
“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.
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.
“ [1]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.”
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 [2]“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 also cited the media’s favorite “ [3]do as I say, not as I do” billionaire as proof that the rich do not pay enough taxes – Warren Buffett, who has supported increased taxes on the wealthy, implying that the rich pay too little.
“This is what Congress in its wisdom did: the 400 of us [here] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter,” Buffett said, according to Newsweek.
At a June fundraiser for presidential candidate and Sen. Hillary Clinton (D-N.Y.), Buffett said that he paid taxes at a lower tax rate than his $60,000-a-year secretary. He paid at a rate of 17.7 percent and his secretary paid 30 percent.
But columnist Larry Elder [4]showed that his assertion is not possible – even in the most extraneous of circumstances. If she is in the highest of possible tax brackets, the highest percentage she would pay is 25 percent.
Newsweek was clearly on the side of tax hikes for the “superrich.” The magazine called those who would increase taxes “reformers.”
The Newsweek story was based on the “rumblings on Capitol Hill,” including a bill by Sen. Chuck Grassley (R-Iowa) and a different bill from House Democrats [5] Sander Levin of Michigan and Charles Rangel of New York. Both bills would raise taxes for such fund manager from the capital gains rate of 15 percent to the income tax rate of up to 35 percent, though Grassley’s bill is more limited.
So how does Newsweek propose to solve the inequity of the tax structure? By electing a Democrat as president in 2008.
“[T]he best bet for real reform would come from across-the-board legislation that increases taxes on the very wealthy in order to pay for tax relief for the poor and middle classes.
In the end, it will probably take a push from the White House. All the Republican presidential candidates are against closing the carried-interest loophole as a tax increase. On the Democratic side, John Edwards, Barack Obama and Hillary Clinton last week all came out in favor of closing the carried-interest loophole,” Newsweek concluded.