Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
A subcommittee in the Connecticut Legislature heard testimony April 11 from the group called Patriotic Millionaires on a bill that would end the carried-interest tax advantage that benefits private-equity and hedge-fund managers.
The bill, H.B. 7313, is before the Finance, Revenue and Bonding Committee. If passed, it would impose “a 19 percent surcharge on income derived from investment management services"—the difference between the 20 percent capital gains tax rate that hedge-fund and private-equity managers currently pay and the 39.6 percent tax rate for ordinary income.
Gov. Dannel P. Malloy (D) has expressed reservations about the measure, saying that with a stagnant economy and residents already leaving the state, now might not be the time to close what some call a tax loophole.
Even if the bill passes, it wouldn’t go into effect until similar legislation is enacted by New Jersey, New York and Massachusetts. Lawmakers worry that taking the step would prompt companies to flee the state in favor of states that still allow it.
A bill with a similar provision about implementation in other states remains in committee in the New York Senate. Massachusetts and New Jersey haven’t introduced bills on the issue.
Among those testifying for the Connecticut proposal were numerous citizens, representatives of labor unions, the Connecticut Citizen Action Group, Connecticut Voices for Children, and Patriotic Millionaires, a Washington-based advocacy group of 200 high-income people.
“The carried interest tax loophole is the poster child of egregious tax loopholes that benefit a tiny number of wealthy and well-connected people. This has been criticized from the left and the right, by Republicans and Democrats, by every major presidential candidate and tax policy expert,” Morris Pearl, chairman of the group, said in his testimony. “Nevertheless, it persists. The current Congress is not inclined to do anything to assess the rich their fair share of the nation’s tax burden.”
Bruce McGuire, chairman of the Connecticut Hedge Fund Association, an organization that advocates for private funds operating in the state, testified in opposition to the bill. The state is a “global leader in investment management” and the third-largest center of hedge funds in the world, with over 400 funds managing $750 billion, he told the committee.
“This position did not come about through government programs, but through a combination of organic factors, including the state’s income tax policy,” he said.
Closing the loophole would cause investment firms to flee to other states, or even other countries, he said. Florida is actively courting the industry, he said, and China “would love to have a part of this industry in their country.”
Also opposed were the Financial Services Institute and the Connecticut Business & Industry Association, which said in a joint statement that the measure would “increase the cost of financial services, jeopardize retirement security for older Americans, impose a financial burden on Main Street Americans trying to save for the future, and force small businesses to become tax collectors for the state.”
To contact the reporter on this story: Aaron Nicodemus in Boston at email@example.com
To contact the editor responsible for this story: Ryan C. Tuck at firstname.lastname@example.org
Text of H.B. 7313 is at http://src.bna.com/nRb.
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)