The Future for Private-Equity Stocks Doesn’t Rest on Taxes

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Heard on the Street: Tax changes have been important for the private-equity industry, but that might not be the case in the Biden administration

from publicly traded partnerships to “C corporations” that pay the corporate tax rate on income.

Converting from partnerships had other advantages, notably making it easier for a wider range of investors and index funds to own the shares. So far, the moves have been a success for investors: Apollo Global Management Inc., Blackstone Group Inc., Carlyle Group Inc. and KKR & Co. have averaged over 30% annualized returns since their respective conversion dates, according to FactSet data.

Now, President Biden has proposed increasing the corporate tax rate to 28% from 21%. If that were the only major change to the tax code, it could in theory work against converted private-equity firms, perhaps when competing for talent or deals with rivals that have lower tax burdens. But Mr. Biden is also proposing

substantially for high income earners, to 39.6% from 20%. This would effectively eliminate the favorable treatment of carried interest.

 

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Changes to a socialist state means a monetary uncertainty.

Translation: Tax changes have been important in helping wealthy people stay that way

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