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Comment by nateburke | Hacker News Reader

The opportunity for trades-based small business creation in America would feel a lot more tangible... absent the carried interest tax loophole.

Part of the small business trades success narrative is built upon trust, trust that in youth, doing good work will create a reputation within your community that will be remembered, and form the foundation for a brand (your name) that can attract the next generation of youth to be developed, trained, etc.

If successful small businesses only exist to get acquired, so that both workers and customers suffer, that foundation of trust will struggle to persist.

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Is it not also reliant on an affluent customer base that can pay high prices for services? In poorer communities are trade jobs lucrative? Obviously in places like the Bay Area they are VERY lucrative, but is that a sustainable narrative to re-tool the economy around?

Certain skills are always in a stable demand, and a relatively short supply. Plumbing, electricity, roofs. Some of this requires a license, all of this requires training and experience which only time and practice can give. Opportunities for that are also somehow limited.

So, if you live in a poorer community and serve a poorer community, you likely make more than most in the poorer community, and likely gain respect if you do a good job.

> If successful small businesses only exist to get acquired

The average small business does not exist to get acquired. Only a very small number of small businesses are even interesting to private equity.

I can't help but notice that PE has been buying up HVAC companies in my region. I think sooner or later everything will get corporatized and even if your goal isn't to get acquired, you still need to learn how to compete with conglomerates.

Not just HVAC, they want it all: https://www.marketplace.org/story/2024/10/24/private-equity-...

Doomed to blow back on PE firms long term.

The trade businesses for home services have significantly less barrier to entry than the usual established business that they would usually buy. All it takes is a van and some tools in many cases for workers to start a new one after working for some years under someone else to get their license. It's a field where the PE firms will be taken to the cleaners on pricing and even customer service.

Definitely never underestimate homeowner's desire to price shop and nickle and dime the smallest of repair.

Which is hilarious because the only thing gatekeeping the homeowner from doing their own HVAC is an EPA 608 cert you can do in like 2 nights in your underwear (cost me like $50 and saved me like $10k), after which you can order 200 lbs of whatever toxic refrigerant you want straight to your home.

It used to be getting the actual HVAC systems was a problem but with internet you can get everything you need and bypass that whole racket, especially if you use mini splits you don't even have to know how to run ducts.

Seeing some replies to the contrary below, with evidence. I am curious about how you define "small number", the unit of measure, is it proportional or a count, etc.

are you suggesting that eliminating carried interest would deter private equity from bothering with small businesses, and make the remaining small businesses feel like a more reliable thing for workers and employers to engage in? because they won't get shuttered unceremoniously?

if I'm understanding that correctly, I have to giggle, because there are plenty of ways for institutional money to have lower taxes than ordinary income tax rates. waaaay lower than the carried interest "loophole".

also, to me, loopholes are unintended things that no one person in government or branch of government noticed. like a couple of private letter rulings from the IRS combined with an accounting tweak in a budget appropriations bill. carried interest isn't one of those to me when it was directly passed by congress explicitly and deliberately affirmed multiple times in subsequent legislation.

but I could be misunderstanding your post entirely.

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