Either That Or Start Taxing Everyone Else At 15 Percent . . .
If the federal government won’t tax hedge fund managers higher than the 15% capital gains rate they currently get, then the city will:
Posted: April 15th, 2008 | Filed under: Class WarUnder the plan circulating around City Hall and Albany, general partners of a private equity or hedge fund would have to pay local business income taxes on their share of profits generated by investments.
The proposal follows a failed push by Assembly Democrats to raise the personal income taxes of people earning more than $1 million a year.
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The new version, developed by the Fiscal Policy Institute and other organized-labor activists, is a city tax, not a state tax, and would therefore have to be first approved by the City Council as a “home-rule” message and then voted on by the state Legislature. It is also smaller in scope. The plan’s crafters say it would raise about $200 million a year, compared to the $1.2 billion a year haul that was expected from the income tax hike.
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Advocates of the tax hike said it would make it easier for city lawmakers to balance the city budget, which is due July 1, without having to rely on additional cuts to services or agencies.
“If the city sends a home-rule message and it expresses its desire to close this loophole and to tax private equity and hedge fund firms the same way they tax a freelancer or small firm, I don’t know why the Senate would be opposed to it,” a Democratic assemblyman of Queens, Rory Lancman, said. The primary force behind both proposals is the labor-financed Working Families Party, a third party that has been a source of political and financial support for lawmakers who are taking up the measure, including City Council members Robert Jackson of Manhattan and Hiram Monserrate of Queens,
“I would think that this has a decent chance,” the executive director of the Working Families Party, Daniel Cantor, said. “We’re talking about a few dozen people who are basically stealing a couple of hundred million dollars from the city.”
City lawmakers and labor organizers are unveiling the plan with a rally today on the steps of City Hall. In 2005 at least 34 of the 51 members of the New York City Council had run on the Working Families Party line.
Carried interest earned by hedge fund and private equity managers had been the target of Congress last year. Efforts to increase federal taxes on that income failed, despite backing from both Senator Obama and Senator Clinton. Senator Schumer had pressed for any tax increase to apply not only to hedge funds and private equity funds but also to oil-and-gas partnerships and real estate partnerships with similar corporate structures.