Thank you, Blackstone, for being so greedy.

Your decision to go public in an IPO has, at long last, led to much-needed scrutiny and legislation that may upend the rules of the game in which secretive private equity partnerships have exploited what is legal but should be illegal: a 20-year-old tax provision that allows partnerships like Blackstone to pay a 15 percent tax rate on capital gains as a limited partnership-- rather than the 35 percent corporate rate. This is morally and economically criminal--especially at a time when the corporate tax base has already been severely eroded due to offshoring, tax havens and other quasi-legal tax plans devised by these masters of the universe and their accomplices in high-end legal and accounting firms.

After Blackstone disclosed the value of its public offering--putting co-founder Stephen Schwarzman's stake at about $7 billion--the AFL-CIO urged the Securities and Exchange Commission to require Blackstone to register as an investment company. As the Wall Street Journal reported, that would require more disclosure, including of investment strategy. The SEC has not yet ruled on the matter.

Meanwhile Blackstone's public buyout--and its attempt to avoid taxation at the same rates paid by corporations--is so brazen that even Senator Charles Grassley ☼, Republican of Iowa, was moved to note, "Right now, some businesses are crossing the line between reasonably lowering their tax burden and pretending to be something they're not to avoid most, if not all, corporate taxes."

Grassley and Finance Committee Chair Senator Max Baucus ☼, (D, Montana)--not known for being a fierce populist---acknowledge that private equity firms' attempt to exploit this loophole has gone too far. They've just introduced the Baucus-Grassley bill--with the intent of stopping Blackstone and other private equity firms (and hedge funds and venture capital firms) which may go public from exploiting this tax advantage. This is good news--especially at a time when this country needs new revenues for a serious public investment agenda. The New York Times has calculated that the legislation could more than double the revenue for the peoples' coffers by increasing the tax burden on private equity firms from $2.3 billion to $5.2 billion. And the figure might be much higher when assets in previous investments are included.

But the bill needs fine-tuning--even some on the Finance Committee admit this proposed legislation is only a first step. For one, it is too narrowly gauged. It goes after only publicly traded firms--and almost all private equity and hedge fund firms are private. It also elides another outrageous tax break that has greatly enriched the alternative investment industry. That is, how to tax "carried interest." Think that's arcane? As the New York Times recently pointed out, it's simply a "euphemism for the hefty performance fees that fund managers haul in." At the moment, those hefty fees are taxed at the capital gains rate of 15 percent instead of ordinary income tax rates of up to 35 percent, which every other corporate executive pays. (And they should all be paying more.) And it's a break that many experts think has even bigger implications than how the partnership is taxed.

And here's another loophole to be outraged about: Since Blackstone has already filed to go public, the bill would give it a five year-grace period at the lower tax rate. Why? Does Blackstone's Chief Executive Stephen Schwarzman really need the money? Consider that both Blackstone and Fortress Investment group, which went public earlier this year, have until 2012 to pay the increased tax rate. Can't you see a handful of Senators making a move--between now and then--to repeal the legislation? (Anyone who cares about taking on corporate greed, and restoring sanity, fairness and decency to our economy at a time when workers' wages are stagnant and benefits like health care and pensions are being shredded should express their outrage to Baucus, Grassley and finance committee members over this unnecessary grace period.)

Now, here's a sweet irony and reason as to why justice may be served--that is, why the American people may not be shafted at the expense of Wall Street's Masters of the Universe. It seems that Blackstone (and the private equity crowd, more generally) hasn't been in the pay-to-play game long enough to have spread around the campaign dollars needed to ensure that the bill is derailed. Moreover, they're also weak on the lobbying front. According to the Wall Street Journal's detailed weekend reporting piece, "Unlike industries like telecom that have huge lobbying shops, the private-equity industry formed its advocacy group only a few months ago."

Yet here's the disgrace: the WSJ reports that private-equity supporters "profess confidence" they can defeat the measure. And Saturday's New York Times quotes one Senate aide, "this is a fundamental misstep in moving legislation in a closely divided Senate. It is unclear what kind of support , if any, the bill will garner." Okay, Republicans still have real strength in a closely divided Senate. That's a given--after all, it's a party that has consistently sold-out the people to the highest bidders.

But what about the Democrats in the Senate? I know where the new populist-progressive Senators--Bernie Sanders, Jon Tester, Sherrod Brown, Jim Webb and Amy Klobuchar--will stand. But what about Hillary Clinton--with her many ties to Wall Street and the financial industry? What about Chris Dodd or Joe Biden, both from states with powerful finance lobbies? Or Obama--who hasn't voted a populist streak in his time in the Senate? And what about former Senator John Edwards--a man running a good populist campaign who worked for Fortress, that private equity firm which launched a public offering earlier this year replete with big payouts? Which side are they on?

Remember that sharp and smart lesson in populist economics delivered by Senator Jim Webb of Virginia in his response to Bush's State of the Union address? The freshman Senator from Virginia talked bluntly and forcefully of an America "drifting apart along class lines"; he pointed out that "it takes the average worker more than a year to make the money that his or her boss makes in one day." It was a message that resonated in last November's elections--witness Webb's upset victory--and the victories of Ohio's Brown, Vermont's Sanders, Minnesota's Klobuchar and Montana's Tester--all candidates willing to speak about economic issues vital to ordinary people. (I look forward to interviewing them on stage this Monday evening, and asking them about how they'll handle this issue, at this year's "Take Back America" conference in DC. For more info, go to www.ourfuture.org)

In a forceful challenge to the destructive inequalities embedded in our supposedly healthy economy, Webb said these times remind him of the age of robber barons a century ago, when a Republican President, Teddy Roosevelt, challenged corporate influence and irresponsible wealth. It's high time to challenge the rapacious robber barons of our time. The first step is to close these loopholes, end any grace periods and get to work on finding resources--through fair taxes on the rich, and on corporations stuffed with profits--to rebuild our country's economic foundations and civic promise. Katrina Vanden Heuvel is editor of The Nation.

© 2007 The Nation