As boss of a big, publicly-traded industrial company, Radnor-based Airgas Inc.'s Peter McCausland (he was CEO until August, now executive board chairman), has fought off buyout funds and other "private equity" investors, and he thinks it's awfully unfair that federal law lets them pocket their multimillion-dollar fees, subject only to a 15 percent capital-gains tax, instead of the higher income and payroll taxes that Airgas's 14,000 employees, managers to truck drivers, have to pay.
Early this year McCausland, a Republican, sent letters saying so to his U.S. Senators -- Robert P. Casey, D-Pa., and Pat Toomey, R-Pa. -- among others in Congress, objecting to unfair tax laws.
Toomey, who as head of the Club for Growth defended lower taxes for private equity managers, now says all taxes ought to be reviewed for possible reform, Toomey spokeswoman Nachama Soloveichik told me. (Revised)
Casey, who is running for re-election, went further and actually defended the tax break: "The venture capital industry is one of the few sources of start-up funding for small businesses," low taxes are a "powerful incentive" for new businesses, and a "dramatic change" in what buyout artists pay would "reduce investment," Casey wrote.
So "both the Republicans and the Democrats were reluctant to come out and say this is a loophole we ought to close," McCaulsand told me. "It's a ridiculous position. It's fundamentally unfair. If a private equity guy invests his own money, that (should qualify) for capital gains treatment. But the income he gets from (investors') money should be taxed like ordinary income."
McCausland's conclusion is that buyout funds -- like the online, sales-tax-free welding-equipment supplier Airgas has had to compete with -- have bought themselves friends in Washington in both parties, to the detriment of the working public and those sectors of the economy with less effective lobbyists. "The press is saying Republicans are in the pocket of Wall Street," but the Democrats "are being supported by private equity," too, he told me.
So McCausland, a Republican, is voting... for Mitt Romney, a professional buyout-fund manager, for President. "When Romney was cornered on this issue, he could have said no," he could have defended lower tax rates for buyout funds like his fellow Bain Capital multi-millonares, said McCausland. (I recently quoted Philadelphia investment banker Andrew Greenberg complaining Romney had indeed failed to stand up for low private-equity taxes.)
"But instead, (Romney) said it's one of those loopholes we're going to be looking at. He wouldn't have been my first choice as a candidate. But he has come out whith this philosophy that you have to show you're serious about cutting spending, and then raise taxes."
Do we dare believe Romney? I asked. He also says, after all, that he wants to cut Social Security and Medicare, while beefing up the military and attacking Iran, and still reduce taxes for investors. Can we trust him to instead act reasonably and work with his political rivals to forge a consensus? Or is that the kind of wishful thinking a lot of corporate Democrats engaged in four years ago when they backed Obama?
"I don't know if it's going to be any different," McCausland told me. "But I'm hopeful."