Targeting was conveyed interest, Republicans unfortunately only see success

It is easy to forget that the co -founder of the Blackstone Group Stephen Schwarzman did not start as a private stock investor. Private investment funds are what he and co-founder Peteseon (1926-2018) migrated after successful careers in investment banking. In private investment funds, they saw that “you could really improve the companies you bought”.

What brought Schwarzman and Peterson to private capital rates of serious thought, as President Trump encourages the Republicans of the House to increase taxes on interests. Higher taxes would punish performance, which means they will actually increase the cost of entry into proverbial fuel to save it. This is what private stock investors do not rarely do when they set investment capital to work. See again because Schwarzman came in first.

Unlike an increase in a fund for him and Peterson investing in Blue Chip companies, they will find businesses in problems, those that fire in a figurative sense and that the typical investor had abandoned. They would improve businesses that have been at the door of death from time to time and would be offset by the rejuvenation of businesses that are not expected to do so. Which is a lot of way to say that interest is the opposite of income precisely because the transfer is so difficult to achieve in the first place.

Translated, “Transferred Interest” is much more than an end to performance, it is an end based on the performance that rewards private shares to make the dirty work of investment, to determine what seems to be inaccessible to most. This is what is paid to the Director of a Private Fund, after the Director has compensated the investors in their fund at a predetermined interest rate. In other words, if private investors succeed in achieving the returns agreed in advance for investors based on successful investments made in businesses that are not blue chips, they are transferred to their compensation.

However, as you read this, Trump and Republicans are thinking of raising interest tax. They see the profits of private stock managers and clearly see them as an easy source of plenty of tax revenue. What they are losing is that achieving the transfer of interest is so willing to tax at higher rates is anything but easy. The evidence that supports this claim can be found in occasionally huge returns paid as “transferred interest”. In another way, if it were easy to buy problematic companies before you convert them, then the transfer of interest would reflect the previous truth through reduced payments. Transferred interest is high in the rare case that is achieved precisely because it is so difficult to achieve.

Trump and Republicans would be wise to think of this truth before taxing the bright, glamorous object. The simple, critical truth is that capital goes where it is treated well. This means that if Republicans increase the tax in extremely difficult to achieve the transfer of interest, the marginal costs of private stock investors to enter the proverbial will increase. Seriously, why the risk not only of capital but also the huge amounts of time and energy for the activity that Congress members are thinking of taxing as formal – and yes – ordinary income?

Schwarzman answers the question above. As he noted in his incomparable memoirs, What do you need“As soon as you succeed, people only see success.” It’s so true, but it’s also so sad. In the past, the party that was thrilled by the economic achievement and myriad social benefits, Republicans have become the party that considers success as another thing to tax.