Independent Democratic Conference Leader Jeff Klein on Wednesday backed the closing of what some say is a loophole in the tax law that allows hedge fund managers to pay a lower tax rate.
The measure was previously introduced by a group of Assembly Democrats earlier this month.
Klein’s bill closes the carried interest loophole which creates a 19 percent carried interest “fairness fee” in income earned by hedge fund managers on investment management services.
If approved, the tax is estimated to bring $3.7 billion in revenue to the state.
“Throughout my career I’ve looked for ways to recoup taxes for the people of New York State like when I fought against bootleg cigarettes,” Klein said in a statement.
“It’s unconscionable when teachers, lawyers and janitors pay a higher tax rate than a fund manager because of a broken tax system. Fund managers must pay the same tax rate for the fruits of their labors and New York will work with surrounding states to make sure this happens. Congressional gridlock will not stop us from fixing this loophole and finally collecting the taxes due to the state for work performed on Wall Street.”
Currently, fund managers receive 2 percent from their clients which for tax purposes is viewed as labor and they receive an additional 20 percent known as carried interest, but that’s not taxed as actual work.
The bill is being pushed in part by liberal economic groups like the Strong Economy for All Coalition and the Patriotic Millionaires.
“Taxing the carried interest income of hedge fund managers and private equity investors can raise several billion in revenue for schools, housing, jobs, targeted tax relief for working people and seniors as well as investments in infrastructure across New York. Closing the carried interest loophole at the state level is a long overdue reform with bipartisan support. We applaud Senator Jeff Klein and his colleagues in state government for standing up for tax fairness and for the needs of our communities,” said Michael Kink, the executive director of the Strong Economy for All coalition.