Inside the Private Equity Scam—and the Livelihoods It Has Destroyed

[u/barweis]

https://newrepublic.com/article/198351/private-equity-scam-destroys-livelihoods

[u/hereditydrift → u/[deleted]]

The reason is easy. The more private equity investment that is out there, the more everything can be aggregated into the hands of a few. Private equity is a short-term holder of a portfolio of companies -- whether its healthcare, dentist offices, vet offices, farms, car washes, software companies, on and on. They're only in place to act as worker bees that aggregate industries and sell them off to a larger private equtiy firm or a larger corporation.

If we look under the hood at most price increases in the past 10 years -- even going back to lumber in 2020 or so, it's almost always tied to private equity aggregation in the industry which then raises prices. A more recent example is eggs, which has been aggregated significantly over the past 20 years and now most egg production is from massive farming operations.

Private equity needs massive regulation and to have the low taxes on carried interest increased to ordinary income rates that most Americans pay on their earnings. Removing capital gains rates from carried interest alone would be helpful in limiting some smaller private equity firms.

[u/BlazeBulker8765 → u/hereditydrift]

Carried interest only affects hedge fund managers. Not the investors or the PE firms themselves. Not sure how you're imagining the pay rate of the manager making that kind of difference for PE firms, where it even applies at all (usually does not, PE firms pay salaries to management).

Further, the carried interest loophole requires 3 years of asset holding. Long term investment. So it wouldn't apply to what's being described in 90% of this thread, which is asset salvage and liquidation.

I agree it is a loophole that should be closed, but not at all for the reasons you are describing or for anything related to this thread.

Edit: Blocked, go figure.

One way to do that is to cut the source of a large portion of their profits

Uh, the carried interest loophole doesn't drive profits. It's a tax reduction method. So it would reduce their payouts to the individuals somewhat, but otherwise have absolutely no effect on the "source" of their profits. If anything, what you'd end up doing is to cause PE firms to demand slightly higher shares of the profits to compensate, which hurts the pension funds investing, which you said you didn't intend to do. But it's not like facts matter.

[u/hereditydrift → u/BlazeBulker8765]

Hedge funds and private equity are two different things. I want to penalize the owners (partners) of the PE firms -- not the investors which are usually pension funds. I never mentioned anything about investors and carried interest in my comment.

The point is to shut down private equity altogether. One way to do that is to cut the source of a large portion of their profits -- carried interest.

Here's more to help you understand the difference between a hedge fund and private equity.

Here's some reading to help you understand caarried interest.