New York lawmakers unanimously repealed a measure to raise $50 million a year by taxing hedge-fund managers who commute into the state, Governor David Paterson said.
The plan led Governor Jodi Rell of neighboring Connecticut to offer relocation assistance to New York-based fund executives who leave for her state. The New York Post reported that Rell held a dinner for representatives of 15 financial firms in Darien, Connecticut, on Aug. 2.
“You have my promise to do all I can to help,” she said in a July 16 letter to the New York Hedge Fund Roundtable, a trade group.
Paterson proposed the hedge-fund manager tax last year and backed away from supporting the measure in early July. “Now Governor Rell will have to find revenues from some other source,” Paterson said in an interview on CNBC today before a scheduled Senate vote on a revenue bill to help close a $9.2 billion gap in the state’s $136 billion budget.
The hedge-fund manager tax plan was repealed by the Assembly and Senate today. The measure was included in an $869 million revenue bill.
New York, the nation’s third-most populous state, has shuffled funds between accounts and delayed payments for four months while running on emergency spending bills in the absence of a complete budget.
Under the hedge-fund tax measure, so-called carried interest paid to managers who work in New York and reside elsewhere would be subject to New York income taxes. Carried interest is the percentage of profits received by investment managers at partnerships.
New York’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.