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Oaktree’s Howard Marks rails against Democrats’ wealth tax plans

“I believe in taxation, I believe in progressive taxation, but I don’t think it should be punitive."

Howard Marks, co-chairman of Oaktree Capital Group, is not one to shy away from stating his opinion. He’s been promulgating his thoughts through widely-read “memos” he periodically publishes on Oaktree’s website for all to read.

Marks shared his thoughts during a keynote interview this week on various topics, including what he viewed as the “punitive” measures against the wealthy included in Democratic candidates’ taxation proposals.

“I believe in taxation, I believe in progressive taxation, but I don’t think it should be punitive and I think when you reach levels where it discourages risk taking and free enterprise, then it’s bad for society, and most people can’t figure that out for themselves,” he said at the Private Debt Investor New York Forum on Tuesday.

Marks singled out the “wealth tax” proposed by Democrats Elizabeth Warren and Bernie Sanders. Warren’s tax is 2 percent on household net worth between $50 million and $1 billion, with an extra 1 percent surtax on household worth above $1 billion. Sanders’ plan would start at 1 percent on married couples with a net worth above $32 million and increase to 2 percent on net worth between $50 million and $200 million, with incremental increases until reaching a cap at 8 percent on wealth over $10 billion. Those numbers would be halved for single people.

“It’s a great path to election for a demagogue to get up and say ‘They have too much, we have too little, they got theirs by cheating, we’re going to take it away,’” Marks said.

Warren has also drawn ire from private equity professionals with a plan to more heavily regulate the industry, the Stop Wall Street Looting Act of 2019. As Buyouts has reported, that bill attacks two pillars of the industry: the tax treatment of carried interest and the ability of PE managers to write off the debt they use to buy companies.

When asked about the election, James Zelter, co-president and chief investment officer for credit at Apollo Global Management said during a separate keynote interview Tuesday it was vitally important for PE firms to more actively engage with Washington.

“I think you have to be very focused on what’s going on in Washington. I think we as an industry do a very poor job collectively,” Zelter said at the event. “There’s a variety of candidates on the Democratic side that are going to be coming … at our businesses so you really better have infrastructure, risk controls, a variety of tools that are at your disposal.”

Action items: Read about Warren’s wealth tax plan here and Sanders’ plan here.