Former United States Secretary of Labor Robert Reich blasted private equity firms for their corrupt manipulation of the tax code in a new video posted to YouTube on Monday.
“Private equity firms are privately owned financial organizations. Here’s how they make money: they buy struggling companies with borrowed money, often using the companies’ assets as collateral for the loans. They then make the purchased company profitable by cutting wages, outsourcing jobs, and stripping assets. Then they resell what’s left of the company, often laden with debt, and pocket the returns,” Reich explained.
The consequences of the financial industry’s monied bonds to lawmakers have caused the costs of two critical commodities to skyrocket.
Housing is the first.
“Private equity has a hand in today’s skyrocketing housing costs. Private equity-backed real estate corporations are buying up both single-family homes and apartment buildings at record rates. In 2021, private equity investors bought nearly one in seven homes in the country’s top metro areas, and private equity-backed corporations now own at least 260,000 homes across the country,” Reich said, noting that this, in turn, leads to “higher rent. Faster evictions. Punitive fees. Shoddier repairs and services, if anyone even shows up at all.”
The second is healthcare.
“Over the past two decades, private equity in healthcare has exploded from $5 billion to over $100 billion a year, from buying hospitals to staffing emergency rooms to taking over nursing homes,” Reich pointed out, citing a particularly egregious example.
“TeamHealth, a staffing agency owned by Blackstone, charges about six times what Medicare charges in emergency rooms. TeamHealth and Envision, another private equity-owned physician staffing firm, are notorious for their use of surprise medical bills. Don’t you just love surprise bills? TeamHealth and Envision doctors aren’t covered by insurance, so when a patient goes to an in-network hospital but is seen by a private equity doctor, the patient gets stuck with a surprise out-of-network bill,” he said.
“Beyond eye-popping costs and surprise bills, patients can also expect lower-quality care,” Reich continued. “A sweeping study examined private equity-owned nursing homes and found dire effects: staff hours were slashed, jobs disappeared, and the use of antipsychotic medications – which have a host of dangerous side effects – skyrocketed. All this contributed to a 10 percent increase in patient mortality. That’s more than 1,000 lives lost every year on average.”
Although he added that the issue does not get the attention that it deserves in the media, Reich did offer a simple solution.
“So what can be done? First and foremost, close the industry’s favorite tax loophole that enables private equity managers to keep their taxes low. The carried interest loophole treats their personal income as capital gains, taxed at a top rate of just 20 percent, instead of the personal income it actually is, with a top tax rate of 37 percent. It’s yet another way private equity is looting America,” he said.
“The pattern is clear,” Reich concluded. “When private equity gets involved, costs get higher and quality gets lower – while the rich get richer. It’s past time for Congress to rein in this predatory industry.”
How Private Equity is Making Your Life More Expensive | Robert Reich
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