Word: taxing
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Dates: during 1980-1989
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While that may be true, even the U.S. tax code is a strong ally of LBO artists. Since the interest on junk bonds and bank loans is tax deductible, companies like RJR Nabisco can borrow at Government expense. Some -- but not all -- of the Treasury's loss can be recouped from capital-gains taxes on the profits of shareholders who sell their stock...
...tax code treats stock profits is another plus for LBOs. Corporate earnings are taxed twice: they are first paid to stockholders out of a company's after-tax profits, and the shareholder then pays taxes on the dividends. "There is no question that our tax laws have a bias toward debt that must be rectified," says a top congressional aide...
...fears that greed, debt and buyouts are all spiraling out of control. "The dealmakers have gone too far," says Samuel Hayes, professor of finance at Harvard Business School. "They have defied that tolerance that allowed them their freedom." Federal Reserve chairman Greenspan urged the Senate in October to consider tax-law changes to curb the debt buildup. Said he: "The laws still provide substantial incentives to borrow...
House Speaker Jim Wright last week urged steps to slow the pace of buyouts, which he said were having a damaging "psychological and economic impact." Meanwhile, members of the Senate Finance Committee have been quietly pondering measures that would reduce the tax loopholes for interest payments and give a break to dividends. To cushion the Wall Street impact of such provisions, they might be included as part of a general tax bill that would seek to narrow the budget deficit...
PUBLIC RELATIONS: this will be the type of effort that the Bush administration will be trying to make when they reverse campaign promises and raise taxes. This is when the administration will blame a tax hike on the Democratic Congress, or claim that economic circumstances are vastly different than during the election. This should be called PROPAGANDA...