Franchises Would Suffer Under "Carried" Interest Tax

Legislation proposed this summer would alter the way private-equity compensation arrangements are taxed, raising the taxes on "carried interest" payments for managing partners and essentially penalizing entrepreneurial risk-taking. 

Proposed 'carried interest' tax increase threatens

All eyes are focused on Wall Street and the credit crunch. People who have never thought seriously about the stock market are tuning in with each closing bell. But they'd worry a lot less if they shifted their attention to Main Street, where the greatest engine of the nation's economy--small business--is calmly and consistently doing what it does best: opening the doors and serving customers.

Nearly 27 million American small businesses are in operation today, according to the U.S. Small Business Administration. Their owners aren't oblivious to what's going on in the credit markets; their fates are also tied to any movement in the economy. But they have their hands full with the daily demands of running a small firm and are acutely aware that every ounce of effort they put into the business becomes sweat equity that can help the business grow.

Main Streeters labor under no illusions about the principles of entrepreneurship. They willingly take risks and, if successful, create value and are rewarded for their efforts. Were that not true, there would be far fewer small businesses to meet the growing, changing needs and tastes of consumers.

Although small, these enterprises represent 99.7 percent of all U.S. employers, provide jobs for half of all private-sector employees and pay more than 45 percent of the nation's private payroll.

While small-business owners may not be able to articulate the theory of risk-versus-reward, they know it instinctively. As one who has spent the majority of his career helping people become small-business owners, primarily through franchised establishments, I have witnessed first-hand the motivating power of entrepreneurial risk. It is more than just a great financial driver; it is a phenomenon that instills pride and self-worth.

With the current turmoil threatening our economy, it would seem prudent for anyone in a position of authority to seek to calm investors, ease consumers' fears and inspire pride and self-worth among those small-firm operators who contribute the entrepreneurial effort so important to the nation's financial stability.