PhillyDeals: Airgas chairman protests uneven federal taxes

Posted: October 17, 2012

As boss of a big, publicly traded industrial business, Peter McCausland, executive board chairman and former CEO of Radnor-based Airgas Inc., has fought off buyout funds and other "private equity" investors trying to make money at his company's expense.

He says it is awfully unfair that federal law lets those high-living fund managers 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-plus employees - managers to truck drivers - have to pay.

Early this year, McCausland, a Republican, sent letters decrying unfair, uneven federal taxes to his U.S. senators - Democrat Robert P. Casey and Republican Pat Toomey - among others in Congress.

"We pay corporate taxes at the highest rates," close to 40 percent, he told me. "If the private-equity people paid income taxes at ordinary rates, and if corporations paid taxes on foreign income, and if Amazon paid sales tax, the system would be more fair."

McCausland did hear from Toomey, who as head of the Club for Growth defended lower taxes for private-equity managers before winning election as Pennsylvania's junior senator. McCausland recalls that Toomey "sent a noncommittal, we-all-want-tax reform" reply. Airgas representatives later met with Toomey staffers to discuss specific tax concerns, Toomey spokeswoman Nachama Soloveichik told me.

"The senator is willing to consider everything, in the context of pro-growth tax reform," Soloveichik said.

Casey, who is running for reelection, went further and actually defended the tax break: "The venture capital industry is one of the few sources of startup funding for small businesses," Casey said. He added that low taxes are a "powerful incentive" for new businesses, and that any "dramatic change" in what investment fund managers have to pay would "reduce investment," Casey reasoned, according to McCausland.

"Both the Republicans and the Democrats were reluctant to come out and say this is a loophole we ought to close," McCausland 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 says the senators' response shows him that buyout funds - such as the online, sales-tax-free welding-equipment suppliers that Airgas has had to compete with, or giant Internet retailers, such as Amazon, which until recently resisted collecting sales taxes - 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," McCausland said. But the Democrats are being supported by private equity, too, he told me.

Voting on faith

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,' " McCausland explained. Romney could have defended lower tax rates for buyout funds like his fellow Bain Capital multi-millionaires.

"But instead, [Romney] said it's one of those loopholes we're going to be looking at," McCausland said. "[Romney] wouldn't have been my first choice as a candidate. But he has come out with this philosophy that you have to show you're serious about cutting spending, and then raise taxes."

"The populace knows the system is unfair," McCausland added. "Romney is on this, and that is one of the more important reasons I am voting for him."

Do we dare believe Romney? I asked McCausland.

Romney also says, after all, that he wants to trim Social Security and Medicare spending, while beefing up the military and waging war against Iran on the side of Israel, without raising the tax burden.

Can we trust that Romney, despite all the impossible contradictions he expressed in his efforts to get elected, will actually act reasonably and work with his political rivals to forge useful consensus for the American people?

Isn't that the kind of wishful thinking a lot of corporate Democrats - and left-leaning Democrats, for that matter - 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."


Contact Joseph N. DiStefano at 215-854-5194, JoeD@phillynews.com, or @PhillyJoeD on Twitter.

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