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Albany, NY - Paterson Retreats From Taxing Hedge-Fund Managers

Published on: July 1, 2010 09:10 PM
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Albany, NY - Governor David Paterson is retreating from a plan to tax hedge-fund managers who commute into the state, which was projected to raise $50 million a year to help balance an overdue budget.

Paterson, a Democrat, said he no longer supports the levy because investment companies could avoid it just by moving to neighboring states. Connecticut Governor Jodi Rell yesterday sent a letter to the New York Hedge Fund Roundtable urging its members to relocate to her state to escape the proposed tax, (as was reported here on VIN News).

“That is one that is worth revisiting,” Paterson said in an interview on radio station WOR in Manhattan. “This is not in my original budget. We were not favorable to this. We did it because we couldn’t get the Legislature to do the other revenue raisers that we thought were far more constructive.”

The Democrat-controlled Senate adjourned today without voting on the bill that includes the tax, part of a proposed $136.5 billion budget for the fiscal year that began April 1. The nation’s third-most populous state has been shuffling funds between accounts and delaying payments for the past three months while running on emergency spending bills in the absence of a budget.

Under the proposal, “carried interest” paid to hedge-fund managers who work in New York and reside elsewhere would be subjected to New York income taxes. Carried interest is the percentage of profits received by investment managers at partnerships.

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Congress Considered

Dan Weiller, a spokesman for Assembly Speaker Sheldon Silver, said today in a telephone interview that the proposal was originally made by the governor last year. He said it re- emerged in a recent three-way budget agreement between Paterson, Silver and Senate President Malcolm Smith.

“What this measure does is to place the same tax burden on out-of-state residents that’s already on state residents,” said Weiller. “This has been a very tough budget requiring many tough choices.”

The state’s top income-tax rate is 8.97 percent. Connecticut’s highest rate is 6.5 percent. Congress separately has considered increasing the federal levy on carried interest by treating it like ordinary income. The earnings are currently taxed at the usually lower capital-gain rate.

Relocation Specialists

In her letter yesterday, Rell, a Republican, said Connecticut economic-development officials and relocation specialists stand ready to help hedge-fund managers and their families who want to move to her state from New York.

“As lawmakers in Albany consider a proposal to vastly increase the tax liability of hedge-fund professionals who work in New York—many of whom have already wisely decided to live in Connecticut—I would like to convey a simple, yet heartfelt, message: Connecticut welcomes you,” she said in the letter addressed to Timothy Selby, president of the Hedge Fund Roundtable. On its website, the group says it has more than 1,200 members who help each other develop knowledge and methods.

Selby said in a telephone interview today that the state “should spend more of its efforts focusing on what it can do to attract and maintain existing businesses.”

Speaking on WOR, Paterson said that “based on conversations” he had yesterday with other elected officials, including Rell, “it might be far more responsible for us to revisit that issue.”

“What Governor Rell said is right and she’s trying to take advantage of it,” Paterson said. “Just make Connecticut the main office and they don’t have to pay the taxes.”

Morgan Hook, a spokesman for the governor, didn’t immediately return calls seeking comment.


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Read Comments (8)  —  Post Yours »

1

 Jul 01, 2010 at 09:14 PM Anonymous Says:

Good decision. Those of us who make a lot of money already pay more than our fair share of taxes. The top 5 percent of earners in NYS already pay more than 60 percent of the taxes. Its time to increase the taxes on the middle and lower income chevrah many of whom pay litte or nothing.

2

 Jul 01, 2010 at 10:26 PM Anonymous Says:

Reply to #1  
Anonymous Says:

Good decision. Those of us who make a lot of money already pay more than our fair share of taxes. The top 5 percent of earners in NYS already pay more than 60 percent of the taxes. Its time to increase the taxes on the middle and lower income chevrah many of whom pay litte or nothing.

That's not the solution either. What to you is "fair" for a family of 8 to pay on a salary of $18/hr? Pay taxes instead of what, tuition?

3

 Jul 01, 2010 at 11:45 PM Anonymous Says:

I'm starting to like this guy, he is a good fighter and most probably would have won the election

4

 Jul 02, 2010 at 12:12 AM nudnick Says:

Reply to #1  
Anonymous Says:

Good decision. Those of us who make a lot of money already pay more than our fair share of taxes. The top 5 percent of earners in NYS already pay more than 60 percent of the taxes. Its time to increase the taxes on the middle and lower income chevrah many of whom pay litte or nothing.

Why not just cut the budget - why rais taxes on anyone

5

 Jul 02, 2010 at 12:49 AM CPA Says:

I'm not sure Paterson is as bad as he's made out to be. However, some of his proposals are not well thought out. This tax proposal would have been so easy to skirt - by simply moving out of state. I counsel very wealthy people in tax matters - some follow my advice and move to Florida before they are about to recognize a huge windfall (there's no income tax there) and some say "If I make that much money, I can afford the tax anyway. In the long run, however, the State will chase big dollars out of here.

6

 Jul 02, 2010 at 02:56 AM joe Says:

Reply to #1  
Anonymous Says:

Good decision. Those of us who make a lot of money already pay more than our fair share of taxes. The top 5 percent of earners in NYS already pay more than 60 percent of the taxes. Its time to increase the taxes on the middle and lower income chevrah many of whom pay litte or nothing.

How much you make, rich guy ?

7

 Jul 02, 2010 at 09:59 AM Dems Be Babies!!! Says:

Reply to #6  
joe Says:

How much you make, rich guy ?

why do you care? maybe he is rich, maybe he wants to be rich? who cares. even min hatorah one may only give 20% in maaser, not more, because GOD realizes that when HE created man, he created with the need to want to create wealth. its what makes the world go round, and is a very moral idea! it is natural law, and when you have the government tax the hoohoo out of you, it makes a person want to throw in the towel.
I will ask you a simple question, when was the last time you were employed by a poor person?

8

 Jul 03, 2010 at 11:26 PM Anonymous Says:

Reply to #2  
Anonymous Says:

That's not the solution either. What to you is "fair" for a family of 8 to pay on a salary of $18/hr? Pay taxes instead of what, tuition?

Don't have 6 kids---if you can't afford them. It is not the responsibility of society to pay for your children---you should pay your fair share of taxes too. Are you not getting the same services as everyone else?

9

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