NY Gov. Cuomo Targets Hedge Fund Managers With 17% "Fairness Fix" Tax

We suspect Puerto Rico and Miami may be about to see a mass immigration... from New York state...

Van Lines

Never one to miss an opportunity for some virtue-signaling and wealth distribution, New York State Governor Andrew Cuomo announced today, legislation to close carried interest loophole with a so-called "Fairness Fix."

 

https://www.zerohedge.com/sites/default/files/inline-images/20180118_cumo.png

Under U.S. law, part of income earned by hedge fund managers, private equity investors, venture capitalists and certain real estate investors is known as carried interest and is treated as capital gains, rather than as ordinary income, resulting in lower capital gains tax rates.

This is reportedly costing NY state about $100m/year.

Cuomo proposing legislation treating “this hedge fund compensation” as ordinary income for state tax purposes.

By imposing a 17 percent "Fairness Fix," every hedge fund manager working in New York State - including those living outside of the state - will be required to pay their fair share and losses under the federal tax code will be compensated. This proposal could raise nearly $1.1 billion annually and help ease the impacts of the federal tax plan.”

Full Press Release:

GOVERNOR CUOMO ANNOUNCES MAJOR STEP IN CLOSING CARRIED INTEREST LOOPHOLE WITH NEW "FAIRNESS FIX" TO ENSURE JUSTICE FOR NEW YORK TAXPAYERS

Governor's Proposal Could Raise More Than $1 Billion Annually

Governor Andrew M. Cuomo today announced legislation to close the carried interest loophole, deliver fairness to all New York taxpayers, and help alleviate the impacts of the Trump administration's federal tax plan. This proposal will fix and equalize the tax treatment of income for private equity investors. Currently, investors pay lower tax rates than ordinary New Yorkers on their income by way of the carried interest loophole. The "Fairness Fix" could raise nearly $1.1 billion annually.

"While the federal government stacks the deck in favor of the wealthy and corporations at the expense of the middle class, we are taking action to protect hardworking New Yorkers and ensure fairness and equality," Governor Cuomo said.

"Closing this egregious loophole will further this administration's efforts to promote economic justice and establish a fair tax code for working men and women across New York."

Under current federal law, a portion of income earned by hedge fund managers, private equity investors, venture capitalists and certain real estate investors - known as carried interest - is treated as capital gains, rather than as ordinary income. As a result, this income is afforded favorable tax treatment in the form of lower capital gains tax rates. This loophole costs the state approximately $100 million every year.

To ensure justice for New York taxpayers and take proactive measures to fight back against the federal government's tax plan, the Governor has proposed legislation that would treat this hedge fund compensation as ordinary income for state tax purposes. The legislation would also impose a "Fairness Fix" to close the carried interest loophole under New York State's tax code. By imposing a 17 percent "Fairness Fix," every hedge fund manager working in New York State - including those living outside of the state - will be required to pay their fair share and losses under the federal tax code will be compensated. This proposal could raise nearly $1.1 billion annually and help ease the impacts of the federal tax plan.

The legislation puts forward a comprehensive, regional approach to addressing the carried interest issue, taking effect only if Connecticut, New Jersey, Massachusetts and Pennsylvania enact legislation having substantially the same effect as this bill.

Governor Cuomo has advocated for hard-working New Yorkers since day one, as Republicans in Washington threaten the economic future of New York State. The Governor has traveled across New York to warn against reforms to the tax code that would increase taxes on New Yorkers by $14.3 billion.

The Governor's proposal will build on years of action to reduced tax rates for New York's middle-class to the lowest level in 70 years. In addition, the progressive income tax rate for taxpayers earning over $1 million, which was enacted by the Governor in 2011, will remain in place through 2019.

In 2016, the Governor enacted a multi-billion-dollar tax reduction that will save New York's middle-class nearly $6.6 billion in just the first four years, with annual savings reaching $4.2 billion by 2025. Over 4 million taxpayers will see an average of $250 in savings next year alone, and $700 annually when fully effective.

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While Illinois was the most ditched state in 2017, we wonder if New York will top that list in 2018... on a dollar tax revenue basis!?

Van Lines

As we've pointed out before, there is a growing wave of domestic migrants that are abandoning over-taxed and generally unaffordable metropolitan areas like San Francisco, New York, Chicago and Miami in search of better lifestyles in the Southeast and Texas.

Domestic Migration

One thing is for sure, Cuomo's donations from the great and good of Wall Street is about to collapse.

Comments

jcaz AldousHuxley Thu, 01/18/2018 - 15:05 Permalink

Oh this is rich.....

Granted, it affects me,  but even if it didn't, I'd ask about taxation without representation.....  And why stop at 17%?  As long as we're making shit up, turn it up to 100%-  run the numbers on THAT tax revenue, Andy......

Good God, dude-  just when you can't be any more of a stupid, vote-trolling whore.......

In reply to by AldousHuxley

Prisoners_dilemna YUNOSELL Thu, 01/18/2018 - 17:24 Permalink

This is excellent news. All incomes which are taxable under Constitution, by way of an excise tax, is just simply awesome, no one has a right to earn their money from the central government, that's a powerful privilege for the few Americans who avail themselves of it. Direct taxes and other capitations, on the other hand, which fall on everyone, are miserable. Thankfully we don't have a direct tax at the moment, only an excise.

 

Of course, most New Yorkers have no idea what the relevant laws say or what their history is. WHat I said above is probably gibberish to most Americans.

 

Recall that capitations and direct taxes are constitutional as long as theyre split up according to population. Indirect taxes, such as excises, must be uniform.

 

In 1862 the Union government was attempting to raise money for the civil war. The Revenue Act of 1861, Section 8  had implemented a direct tax, intended to raise money for the war; "And be it further enacted, That a direct tax of twenty millions of dollars is hereby annually laid upon the United States, and the same shall be and is hereby apportioned to the states, respectivelly, in the manner following; To the State of Maine, four hundred and twenty thousand eight hundred and twenty six dollars. To the State of New Hampshire...".

 

The Revenue Act of 1861 failed;Not because it was unconstitutional, but because it was difficult to collect. The Union government attempted to simplify the collection of this direct tax by authorizing the States of the Union to collect the portion due from its citizens, and remit it to the Federal Treasury; If a State Government did this, they would be entitled to a 15% discount. A few of the States responded to this incentive, some didn't. The Southern States obviously didn't pay anything and were considered to be in "Insurrection". Revenue Collectors had to perform the difficult and time-consuming task of going door to door to collect the remainder due from any citizen whos State didnt pay the direct tax on his behalf. Revenues from this direct tax did not come in quickly and there was a war to fight.

 

Responding to this, in 1862 the Union government decided to do two things;

 

First, Congress passed a law to limit the collection of the 1861 direct tax on all that came in for all Americans, to just one year. They did this in the Revenue Act of 1862, Section 119. Despite only allowing this direct tax to be in operation for only a year, it became such a pain, even after collections were finished, that by 1864, it was dispensed with completely in Section 173 of the 1864 Revenue Act where they said no further direct tax shall be assessed until Congress passed another law authorizing one. For the next 2 decades, this direct tax, and its difficult implementation, and its disastrous fallout actively haunted Congress.

 

Second, the Revenue Act of 1862 passed by congress instituted an excise tax on federal salaries, and all other sources of federally connected incomes. This enabled the government to raise revenues immediately by way of withholding, since all payers were themselves government entities. This type of tax, was modeled after the European variety where "the Kings Men" were taxed on their "incomes".. ie. those who got their income from the central government, paid back a portion of their profits. These taxes were also "progressive". ie. those who made more money from their relationship to the central government paid a higher rate of tax. Those who realized less profit from their relationship to the federal government paid a smaller tax rate on their smaller profits. This tax is generally regarded as fair and useful, In Europe, and by the Union government in 1862.

 

As a quick aside, apparently in 1815 Secretary of the Treasury Alexander Dallas contemplated the enactment of an income tax to raise up to $3 million dollars for the 1812 war effort. He modeled his idea after the income tax Britain adopted in 1799 to finance the Napoleonic Wars. Dallas assumed that such an income tax constituted an indirect tax, and would not require apportionment; it was an excise, not a direct capitation. The tax was not on everything that came in, but on the privilege of deriving not just pay, but gains and profits, ie. income, from the central government. The House Ways and Means Committee responded lukewarmly to the proposal, and the war ended before any income tax could be enacted.

 

The direct tax on all that comes in, to every citizen, was a failure in 1861. So the Union government created the first version of an excise tax  in 1862, on a specific flavor of incomes, those derived from the federal government, in whatever way, although the tax on wages and salaries clearly and specifically only falls on federal employees only, and not on private-sector wages. 

 

 

Knowing the history of why the Union government implemented the type of tax it did will help us understand the original EXCISE "income" tax' exact intent. Even though wording may have changed since then, thru repeated codifications, the 1862 Act clearly states its the wages and salaries of Federal Employees, and nothing else, that is being taxed, wages-wise. It then also states that any incomes derived from any other federally-connected activity is also taxed. The tax implemented in 1862 is not a direct tax, and it most certainly is not an unapportioned direct tax. This is clearly seen, not only by the clear language of the act, but also by considering the Revenue Act of 1862, in light of revenue efforts that had failed the year prior. Although the wording of the Act has changed thru amendment and codification , the nature of the tax  and the meaning of the underlying Statutes remains.

 

To learn how to put this information to use, and to learn about other Revenue Acts, Supreme Court decisions such as Springer, Pollack, and Brushaber, the relationship between Title 26 and the underlying Statutes, see www.losthorizons.com

 

To learn more about the Revenue Act of 1861, see https://www.jstor.org/stable/1879642?seq=1#page_scan_tab_contents

In reply to by YUNOSELL

hedgeless_horseman CheapBastard Thu, 01/18/2018 - 14:07 Permalink

 

This is reportedly costing NY state about $100m/year.

Costing? 

Really?

This choice of verb is frightening.

Any money the government doesn't steal from the people is now a cost.

 

A Quick and Simple Plan For Politicians to UNFUCK AMERICA

4) Pass a Flat Tax Amendment, not to exceed 10%, no deductions, with an equivalent rate for income and capital gains

    "We hold these truths to be self-evident, that all men are created equal."

In reply to by CheapBastard

Jack's Raging … AldousHuxley Fri, 01/19/2018 - 14:56 Permalink

Constants are superior to percentages for taxation purposes. There are many reasons, but the primary reason is that it provides a very potent incentive for TPTB not to debase/inflate the currency. That single thing solves the worst of the problems. The avarice and destruction of The State are limitless though, so these solutions are never tenable. The power of The State must be destroyed, because it cannot be controlled.

In reply to by AldousHuxley

Chupacabra-322 hedgeless_horseman Thu, 01/18/2018 - 14:44 Permalink

4) Pass a Flat Tax Amendment, not to exceed 10%, no deductions, with an equivalent rate for income and capital gains

    "We hold these truths to be self-evident, that all men are created equal."

 

7%.  And, I’m being generous. Also, put a moratorium on it for 100 years. So as long as the Criminal Federal Reserve has been in existence.

In reply to by hedgeless_horseman

Jack's Raging … hedgeless_horseman Thu, 01/18/2018 - 15:35 Permalink

None of those would work, at least not for long. You can't create rules for people who don't obey rules. At a minimum, the federal government and all agencies under it have to be dissolved and destroyed without exception. All states have their own equivalents, and the natives of those locations can evaluate at that point. There are plenty of states that need to be balkanized as well.

In reply to by hedgeless_horseman