Reporter: Mayor Murray, you've established an
Inequality Committee to consider a
$15/hour minimum wage in Seattle . . .
Mayor: Yes, that's right. We’re determined to reduce the excessive inequalities of wealth and income in Seattle.
Reporter: Well, if you’re really serious about reducing inequality, then why is the Seattle City Employees’ Retirement System planning to triple its investment in Private Equity?
Mayor: Private Equity? You mean the sort of thing Mitt Romney was involved in?
Reporter: Yes, Private Equity is the province of the very wealthy, and Private Equity investors enjoy one of the most unjust loopholes in the Federal tax code.
Mayor: Which loophole is that?
Reporter: It's the so-called "carried interest" loophole that allows Private Equity investors to pay lower tax rates than most Seattle workers pay. (See here and here).
Mayor: That is unfair! But the City of Seattle can't do anything about the Federal tax code.
Reporter: Well, not directly, but Private Equity firms hire lobbyists to preserve this tax break, and Seattle invests money with these firms. (See here).
Mayor: OK, I take your point. But the Seattle Retirement System must act prudently, not politically, when it invests.
Reporter: Yes, of course, but did you know that the Seattle Retirement System's largest investment in Private Equity, a $20 million bet on a Private Equity firm located in the Cayman Islands, is now worthless? (See here and here).
Mayor: All investors make mistakes.
Reporter: Granted, but according to the Retirement System’s own website (here), Seattle's Private Equity investments have underperformed their benchmark by 7.5%/year over the last five years, and by 1.5%/year since April 2007. And these figures don't even include the high fees charged by Private Equity firms.
Mayor: (Sigh) That's depressing. Have you talked the Retirement System's private financial advisors about this?
Reporter: Oh, they love Private Equity. But then they get much higher fees when Seattle invests in actively managed funds like Private Equity.
Mayor: So, the upshot is that, by getting out of Private Equity, Seattle can make better investments and strike a blow against the unjust tax loopholes that benefit the very rich.
Reporter: Well, many economists, including several Nobel Prize winners, think so. (See here).
Mayor: Perhaps I should talk with Councilmember Licata; he's the Chair of the Seattle City Employees’ Retirement Board.
Reporter: You’ve both said you want to address