Prometheus 6

“It makes sense for three guys in a garage making something,” said Victor Fleischer, an associate professor of law at the University of Illinois who met last month with Congressional aides to discuss his research on the tax advantages of private equity firms. “But when you apply those to a $1 billion investment fund, it doesn’t make that much sense.”

The amount of taxes at stake is huge, based on a rough estimate of the earnings of the biggest private equity firms.

Tax Gap Puts Private Equity Firms on Hot Seat
By JENNY ANDERSON and ANDREW ROSS SORKIN

This week, Goldman Sachs, Wall Street’s most profitable firm, reported that it earned about $3.4 billion for the second quarter. As always, it set aside a big chunk of money — $1.1 billion, or about 32 percent — to pay corporate income taxes on its healthy profits.