“The Billionaires’ Loophole” is a New Yorker article on how a rich guy doesn’t pay a high enough (in the writer’s opinion) tax rate. What I think is more interesting is just the texture of how this guy got rich:
In 1975, after graduating from Duke and then the University of Chicago law school, and spending two years at the corporate law firm Paul, Weiss, in New York, Rubenstein served as the counsel to Senator Birch Bayh, Democrat of Indiana, on the Subcommittee on Constitutional Amendments. A year later, at the age of twenty-six, he joined Jimmy Carter’s Presidential campaign as a policy aide and was subsequently hired as a deputy to Stuart Eizenstat, President Carter’s domestic-policy adviser. Rubenstein helped write memos for Carter, prepare him for press conferences, and draft State of the Union addresses. … “His vision was to combine capital with politically connected people whose phone calls are accepted around the world. We laughed at him, like, Yeah, right.”
In 1986, Stephen Norris, a lawyer for Marriott, learned of a change to the federal tax code recently initiated by Senator Ted Stevens, Republican of Alaska. It allowed Alaska Native corporations, created under the Alaska Native Claims Settlement Act, to sell their paper losses at a discount to companies that could use them to reduce their own taxes. Norris started a business that matched companies with Native Alaskans and persuaded Rubenstein to leave Shaw, Pittman and join him. In a single year, they brokered the transfer of a billion dollars in losses, earning at least ten million dollars in fees. In 1987, they were on the verge of another big transfer when the government closed that loophole. The episode became known in Washington business lore as the Great Eskimo Tax Scam.
In September of that year, Rubenstein founded the Carlyle Group … Carlyle struggled in its first several years, making an unsuccessful venture into airline food, with Caterair, and losing a bid for the restaurant chain Chi-Chi’s. In 1990, though, the focus on Washington paid off. … Two members of the George H. W. Bush Administration, Richard Darman, the budget director, and James Baker III, the Secretary of State, joined Carlyle when they left the government. In the late nineteen-nineties, the ex-President himself came on board and helped position the firm to win a bidding war for one of South Korea’s top banks.
In 2007, Carlyle’s twentieth anniversary, the firm managed seventy-five billion dollars in assets, and Rubenstein made his début on the Forbes 400 list. By 2009, Carlyle’s portfolio included $1.5 billion from the New York State pension fund. According to an investigation that year by Andrew Cuomo, then the state attorney general, the pension money had been obtained in part through improper payments to middlemen by a Carlyle affiliate. Though Carlyle was not accused of any wrongdoing, it agreed to pay twenty million dollars to resolve the matter.
Anyway, you get the idea. The article is worth reading if you’re interested in the structure of the current U.S. economy.