Grover Norquist: 2020 Democrats' solutions all require higher taxes, more regulations. Here's who gets hurt

Every policy proposal released by Democrats running for president and Congress is a combination of higher taxes and more regulations that end up harming American workers, families, and savers. 

Every policy proposal released by Democrats running for president and Congress is a combination of higher taxes and more regulations that end up harming American workers, families, and savers.

Take Massachusetts Democrat Senator Elizabeth Warren, for example.


Warren has released numerous proposals that will harm the economy and workers and clamp down on American entrepreneurship and innovation. Among her proposals are imposing numerous new taxes on workers and businesses, ending private health insurance for 180 million families, levying new taxes on banks and financial transactions, and having the government file your taxes for you.

Oh, and imposing a 30 percent national gun tax and a carbon tax which would raise gas prices at the pump, your electricity bill, and costs of living.

Toward the top of Warren’s list of “solutions” is a proposal to regulate and tax private equity investment out of existence. Warren ignores the fact that this will not just affect the industry, it would end millions of jobs that are supported by private equity investment and threaten the livelihood of retirees and pension funds that rely on private equity for financial security.

The fact is, private equity is a fancy name for a simple concept. The basic idea involves a firm pooling funds together from different investors, such as state and local pension funds, and then investing that money in companies that are poised for growth or that are undervalued or under-performing.

After successful investment, these companies can be put on a stable path, saving jobs and creating jobs while generating returns for investors and pension funds.

Warren’s proposed “Stop Wall Street Looting Act’’ will impose significant restrictions, liabilities and tax increases on the private equity investments.


The legislation doubles the tax rate on investment for private equity and other entrepreneurs– from the top capital gains tax of 23.8 percent to 40.8 percent – and imposes discriminatory limitations on the ability to PE-backed businesses to deduct debt.

It would hold firms liable for all debts, legal judgments and pension obligations of their portfolio companies – potentially bankrupting any firm in a single deal.

The legislation would also reorder bankruptcy law by having courts consider labor interests above other financial considerations in the bankruptcy process.

The result of these proposals?

At worst, Warren’s heavy-handed legislation could cost more than 26 million jobs over the long-term (including nearly 9 million jobs directly supported by private equity) and reduce combined federal, state, and local tax revenue by $475 billion every year according to research by USC Professor Charles Swenson and the Chamber of Commerce.

Even a more modest scenario would see the industry shrink by nearly 25 percent, resulting in the loss of 6.2 million jobs, including almost 100,000 jobs in the private equity and industry and 6.1 million jobs in invested companies. Combined federal, state, and local tax revenue would drop by $109 billion every year.

Suffice it to say, Warren’s legislation would do more damage to our economy and to households while effectively eliminating the private equity industry itself.


Some of the companies that have benefited from private equity are start-ups like Lyft and Airbnb, while others are contributing to America’s manufacturing revival. Some are keeping the U.S. on the cutting edge of technology, and even more are well-known businesses in neighborhoods and communities across the country like Dollar General and Dunkin’.

Like any investment, there is risk and a chance of both success and failure. However, on the whole, private equity promotes jobs and higher wages, while delivering strong returns for retirees, public pension funds and other investors.

On the other hand, if Warren’s legislation were to go into effect, public pension funds and retirees (such as police, teachers, and firefighters) would be hardest hit. They account for almost 50 percent of private equity investment and would lose anywhere between $329 million to $1.65 billion annually.

Money that teachers and other workers in all 50 states have earned over their lifetimes would have to be invested in much lower-yielding investments, resulting in lower returns and, ultimately, a less secure retirement.

Clearly, private equity fund investments produce significant returns to some of the largest pension funds in the nation – including in Senator Warren’s home state of Massachusetts, where the state’s Pension Reserves Investment Trust ranked number one in the nation with its annualized 13.63 percent 10-year return on private equity investments.

If Senator Warren and other Democrats have their way, they will impose crippling new taxes and regulations on private equity. The real victims of this proposal are not only investors but also the workers who will be harmed through fewer jobs and lower wages and retirees who will see their life savings shrink.

Grover Norquist is President of Americans for Tax Reform