Unless Congress treads lightly on delicate private equity and buyout firms like The Blackstone Group, we could see an end to entrepreneurship as we know it, the Bush administration warned this week. But under current tax law it could take Blackstone a mere 15 years to get back all the taxes it paid -- plus pocketing an extra $200 million -- on the $4.75 billion it made from going public on June 22.

Call it triumph of the good will.

According to a story in New York Times, Blackstone will pay a tax bill of $553 million on its earnings from a going public, a nice deal in itself, but over time will get back $750 million.

Here's how Blackstone pulled off the feat:

Blackstone’s tax maneuver hinges on its use of good will, an accounting term for the value of the intangible assets, like a well-known brand name, that are built up by a company over time. That value is part of the reason a company is worth more than the sum of its physical parts, like buildings and equipment.

Individuals who create good will cannot deduct it. But when good will is sold the new owners can because its value is assumed to erode. The Blackstone partners sold the good will from their left pocket to their right.

In simplest terms, the Blackstone partners paid a 15 percent capital gains rate on the shares they sold last month in the initial stock offering to outside investors (those shares represented a stake in the Blackstone management company, not its funds).

Blackstone then arranged to get deductions for itself for the $3.7 billion worth of good will at a 35 percent rate. This is a twist on the “buy low, sell high” stock market adage; in this case it would be “tax low, deduct high.”

When Blackstone announced its move to join the New York Stock Exchange (it's listed as BX, for "bucks"), Congress began debating whether to change tax rules for fund managers. Top managers average $363 million a year and Congress is considering whether they should pay 35 percent on earnings or the 15 percent capital gains rate.

But Congress is not looking at the tax loophole used by Blackstone:

Lee Sheppard, a tax lawyer who critiques deals for Tax Notes magazine and has studied the Blackstone arrangement, said it was a reminder of the disconnect between the tax debate in Congress and how the tax system actually operates at the highest levels of the economy.

“These guys have figured out how to turn paying taxes into an annuity,” Ms. Sheppard said. “What people don’t realize is that the private equity managers, the investment bankers, all the financial intermediaries, are in control of their own taxation and so the debate in Washington about what tax rate to pay misses the big picture.”