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Comment by shaqbert | Hacker News Reader

Gist of articles: Private equity returns are more explained by overall bull market that individual talent.

My 2 cents:

Private equity is a key winner of the ever increased "cost" of going public. Enron, Worldcom and other scandals made the legal pendulum swing hard in investor protection. Quarterly calls, getting hounded by analysts, making the number, lawsuits, short sellers... live is tough for a public company CEO.

As a result, private equity has grown so much, displacing the public markets. With this outsized footprints, it is only natural that returns zone in on the market returns.

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> more explained by overall bull market that individual talent

Old Wall Street saying, that everyone is a genius in a rising market.

The carried interest loophole has certainly helped as it keeps costs artificially low.

It also short changes social security and Medicare.

Maximum taxable earnings for SS is $128,400. Everybody who takes advantage of the carried interest loophole draws a regular salary too, and it's much higher than 128K, so no effect.

Not quite, although I guess it is technically a different loophole.

> Another sharp difference involves a tax category called self-employment tax, a substitute for Social Security and Medicare taxes paid by filers who don’t have regular paychecks.

Rauner’s returns show he paid no self-employment tax in 2015 and 2016, years in which he collectively reported nearly $279 million in adjusted gross income. In 2014, Rauner paid just $152 and last year just under $20,000.

The IRS has recently begun cracking down on investors in limited liability corporations such as those in private equity for underreporting income subject to Social Security and Medicare tax.

A 2016 study by the federal agency estimated such underreporting had cost the two financially struggling entitlement programs for retirees $65 billion between 2008 and 2010 alone.

https://www.politifact.com/illinois/article/2018/oct/21/raun...

Life doesn't sound that easy for the CEO of a private company owned by a PE firm either: Lots of debt to service, high pressure to deliver, and bosses that are much more direct and demanding than a public company board would normally be.

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