The following is an excerpt from a New York Post article that mentions research conducted by Accounting Professor Brad Badertscher on companies involved in leveraged buyouts. To read the entire article visit: Paul Ryan has supported tax-reform bill that would hit private equity.
Mitt Romney made his fortune in private equity — but don’t expect his new running mate to defend it.
Paul Ryan, who has some big Wall Street backers, has expressed support for a tax-reform bill that would make leveraged buyouts — central to the PE business — considerably less profitable.
The Bipartisan Tax Fairness and Simplification Act of 2011 aims to lower the top corporate tax rate, without expanding the deficit, by closing loopholes and tax breaks — including one that encourages companies to load up on debt. The bill would limit interest tax deductibility that favors debt over equity.
Any change in the tax treatment of debt would threaten the lifeblood of the private-equity business — including Romney’s former firm, Bain Capital — which counts on the deduction to make debt-laden deals more profitable. Exerpt
A study of 80 companies involved in leveraged buyouts conducted in 2009 by Notre Dame professor Brad Badertscher
found those businesses paid about a 22 percent marginal tax rate before being bought and only 10 percent the year after going private.