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Thread: massive unintended consequences about to be 'unleashed' ?

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    Default massive unintended consequences about to be 'unleashed' ?

    On the surface, the logic behind this latest Washington proposal 'sounds good' ... why should multi-millionaires get away paying taxes at a 15% tax rate when middle class people (like full time dancers) often have to pay taxes at a 30%+ rate.

    But in the 'real world', multi-millionaires are not going to simply sit still and take this sort of a 'hit'. They are going to move their money out of these Private Equity Funds and move it into something else which offers a higher after-tax rate of return.

    Since it has been Private Equity Fund buyouts of public corporations which has contributed (to a measureable degree at least) to higher stock prices, if the buyouts stop the stock prices will likely stop rising as well. Additionally, since these buyouts have in virtually every case left the corporations with much greater debt load in order to partially self-finance the buyout, the corporations are at much higher risk of facing bankruptcy if business levels / profits take a downturn.


    really asks a lot of important questions along this line !

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    Default Re: massive unintended consequences about to be 'unleashed' ?

    Quote Originally Posted by Melonie View Post
    Additionally, since these buyouts have in virtually every case left the corporations with much greater debt load in order to partially self-finance the buyout, the corporations are at much higher risk of facing bankruptcy if business levels / profits take a downturn.
    Have you been reading up on Burger King?

    EDIT: I almost forgot, they could get the tax benefits of being a REIT if they wanted to, but they couldn't get away with the fees that they charge.

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    Default Re: massive unintended consequences about to be 'unleashed' ?

    ... as in the private equity investors in Burger King opting to pay themselves a $357 million dollar dividend when they took the company public ... which was paid for by forcing the company to take on $350 million dollars worth of additional corporate debt ... which in turn left the company with a debt load of about 6 times earnings. On top of that Burger King has now gone out and borrowed another $100 million which it will use to buy back (and therefore pump up the price of) its own stock shares.

    Actually, Burger King is benefiting greatly from the decline of the US dollar right now. It is opening more 'restaurants' in foreign markets, and the company's profits from these new 'restaurants' as measured in euros or yuan now translate into many more US dollars than they would have in the past.

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