Debate over private-equity tax policy

YOUR OCT. 9 editorial, "Masters of the Universe 2.0," makes a fundamental error when it asserts that private-equity partners are simply the managers of large pools of money. In fact, they are owners, not managers, who buy companies, rehabilitate them with an influx of capital and new strategic thinking, and, if they do a good job, sell them at a profit.

As owners, private-equity partners make key operational decisions, hire and fire senior executives, and sit on boards of directors. Money managers perform none of these functions. And like all other owners of capital assets, private-equity investment partners are entitled to long-term capital gains treatment on their profits, 80 percent of which are distributed to pension funds, university endowments, charitable foundations, and other investors.

It is easy, but wrong, to characterize the debate over private-equity tax policy as one that affects only billionaires. The "carried interest" profit structure is used by hundreds of small and mid-size private-equity firms that invest in local businesses; by real estate investment partnerships that are instrumental in revitalizing neighborhoods; and by venture capital firms that invest in the technology of the future to create jobs, innovation, and economic growth.

The Globe's editorial substantially mischaracterizes the facts surrounding this important debate.

DOUGLAS LOWENSTEIN
President
Private Equity Council
Washington