Billionaire private equity dude David Rubenstein is apparently set to buy the Baltimore Orioles for $1.725 billion … eventuall, at least. The delay in Rubenstein (and some other rich guys, reportedly including Cal Ripken Jr.) taking full control of the team is because the Angelos family needs to wait on a full sale until current nonagenarian owner Peter Angelos dies, to duck out of paying capital gains taxes, as Marc Normandin explains in detail. The Baltimore Banner reports that the tax dodge will save the Angeloses (and cost U.S. taxpayers) “hundreds of millions of dollars”; since the Angeloses are set to turn a $1.552 billion profit on Angelos’s 1994 purchase of the O’s and the top capital gains rate is 20%, that’s likely about $310 million in tax losses, but whatever the actual number it’s a good reminder that the “step up in basis” rule is a dumb subsidy for rich people that would have been abolished in 2016 if not for Congressional Republicans.
The other aspect of the sale that’s drawing attention is that Rubenstein was reported to be interested in buying the team back in December, at which point state senate president Bill Ferguson slammed the brakes on the O’s stadium renovation plan on the grounds that he didn’t want to give a billion dollars or so to a team that was about to be sold. What happened next, according to the Banner:
CEO John Angelos called Maryland Gov. Wes Moore on Thursday evening to assure the governor the Angelos family does not plan to sell the team, according to two sources with direct knowledge of the call.
In that private phone call between Moore and John Angelos, Angelos refuted Bloomberg’s story, which stated that Rubenstein of Carlyle Group Inc. was engaged in talks.
Angelos, then, either fibbed to the governor or completely coincidentally started talks to sell the team to the guy he said he wasn’t going to sell it to, immediately after promising he wasn’t going to sell. Either way, Angelos got his state money a week after calling Moore, and the legal principle of “no backsies” applies, so that’s that.
While all of this is extremely unseemly, it’s all fair in love and subsidies, at least until Congress either cracks down on the capital gains tax loophole or reconsiders David Minge’s bill to impose taxes on local-level subsidies. I’ll be over here, not holding my breath.
If the only thing keeping this common-sense legislation from approval was Republicans controlling the Congress- in 2016 they held both houses – why didn’t Warren bring it up when Democrats held a trifecta in 2021?
She did:
https://www.cnbc.com/2021/03/30/senate-dems-propose-capital-gains-tax-at-death-with-1-million-exemption.html
It doesn’t look like it got any farther than being a “discussion draft,” presumably because either Biden or the Senate leadership decided not to pursue it. I’ll dig around some more to see if I can figure out exactly what happened.
Even if Manchin and Sinema were on board to get to 50 Democratic votes, the Republicans could have filibustered knowing there would not be 60 votes in favor.
Even if the heirs receive stepped-up basis won’t the estate be subject to estate tax?
Yes, but that’s a tax on the inheritance, and they’d have to pay that either way on the market value of the team. The capital gains tax would normally be on the sale, but will be wiped out by the step-up in basis loophole.