Hedge funders and Scott Frantz to meet with Governor and plead not to be slaughtered. Run away!
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Money manages benefit from the greatest tax looophole of all time — their “share” of their investor’s profits are taxed as capital gains instead of the ordinary income that they are. At the federal level it is 15% instead of the 35% ot should be. Connecicut should tax carried interest at ordinary rates. I don’t know the Connecticut rates, but the differential is probably not enough to make many people move.
seriously may not be able to vote for him again – it is time for the hedgehogs to pay taxes like the rest of us.
Love the hair, Scott.
What is the number one mantra of dirt salesmen? Location, location, location. That is what Greenwich dirt sellers have always pushed. And why Greenwich dirt was premium priced. But technology is making that irrelevant. You can work anywhere now. So we need another edge to stay on top.
So why live in Greenwich? What is our competitive advantage? Think about that.
Lower taxes? Gone!! Do like Lizard Boy suggests, and tax carried interest at ordinary rates. Yeah, that will help our market. Continue to raise State spending and make Connecticut the highest taxed state in the nation. That will raise real estate prices here, right?
Greenwich schools are the best, right? No one, even out of towners, buy that BS anymore.
In order for Greenwich dirt prices to rise, you need to create an environment where more people want to live here. If Connecticut does not appeal to folks as more advantageous from a tax standpoint than New York, that will not happen. No matter how much the GAR tells us Greenwich dirt is better than NY dirt. Greenwich has lost all competitive advantage to New York, due to technology, mismanagement, higher taxes, and the douche bag density of the people who live here.
You want to light off some fireworks this weekend?
So Dan should have taken the jobs listening tour back while concocting the state budget and actually incorporated what he had learned in the budget.
At the very least, a broad pro jobs listening tour prior to releasing the state budget could have helped shaped some of the perception about CT.
That measly 15% – it’s my understanding that’s only paid if and when any money is taken out, unlike, let’s say a mutual fund, where you get dinged regardless.
Right or wrong?
Assuming a common 2 & 20 fee deal, the 2% fee is taxable income. The 20% carry is 15% federal & 6% CT for a total 21% capital gains tax.
How much more should we punish successful money mangers for their success?
Walt is right.
Hu Nhu – All personal income from whatever source should be taxed at the same rate. That was the law until idiot George Bush the Elder and idiot George Mitchell changed it. Why should money managers pay 15% on billions while workers pay 35% on mere millions? Why should Bill Gates pay 15% of his $400 million a year in MFST dividends?
Walt is absolutely right. There is nothing wrong with the carry treatment as it currently treated under the tax code, as a capital gain at the time it is recognized. After all the fee is completely at risk to performance.
Furthermore, it would be absolute financial suicide for the state of CT to go its own way on taxing the carry. Hedge funds are as mobile as they come and I am sure that anyone of the remaining 49 US states would welcome a non polluting firm who’s employees would provide outregeous income tax revenue.
My god, nothing could be dumber than for CT to create its own tax the carry tax.
If you dont like the capital gains laws in this country, take the fight to washington.
Ingua, I actually agree with you. The capital gains laws give an enfair advantage (subsidy) to capital formation vs labor. My point however is that this is a national issue and can only be addressed in Washington. Any state that ponders its own atypcial ideas will be punished – swiftly, by the markets as hedge fund shops will surely move.
My perscription for fixing the economy & budget:
1) eliminate all capital gain tax rules. all income shall be ordinary income
2) raise the retire age – incrementally…slowly
3) elevate the priority of nat gas to our energy policy
4) permit more oil/gas drilling. this are great jobs and we need to curb that trade deficit which is 50% driven by energy
5) phase our ag subsidies
6) trim all domestic – non defense spending 10%
7) revise the unemployment program to require mandatory volunteer work for 15hrs per week after 6 months of unemployment insurance
8) increase our spending on domestic infrastructure – but only after a major overhaul on prevailing wage / davis-bacon rules.
I believe without robust capital formation there is scant job creation, and I
think those who save and invest,–i.e. put at risk– their after tax earnings,
deserve favorable tax treatment. Capital seeks a friendly locale, and where it is employed, growth follows. That is why the Dutch and other countries tax capital gains at a zero rate.
I’m confused on this tax issue. Whether carried interest is or should be taxed as a capital gain or ordinary income is a federal question, not a Ct. one. All income in Ct. is taxed the same, so why should we care on a state level?
CC – I don’t know the ordinary income/cap gains differential in Connecticut, but it can’t be more than a few points, and very few people are going to relocate families for that.
Your ideas are pretty good. I would only add that with respect to energy, it is not necessary “to elevate the priority of nat gas.” All the government has to do is stop all energy subsidies and mandates.
I dont disagree with your point that job creation follows capital formation Hu Nhu.
Hu Nhu, I don’t disagree with your point that job creation follows capital formation.
The question is, do we really have a capital formation shortfall in the US these days? I think the answer is clearly not. Over the past 20 years we have witnessed an unparallel growth of the financial services sector. Now that machine is sloshing around looking for worthwhile investment ideas while laying low in gold and treasuries. I don’t see a capital formation problem as evidenced by the low rates in all of the global credit markets. I see a tax policy that is no longer necessary and one that allows those who escape the world of wages to the world of capital as a primary source of income an unneeded advantage.
Circling back, my biggest issue with the debate on taxing hedge fund carry was the it singled out hedge funds for an unfair advantage when all along we all have access to the same advantage (corporations, individuals, etc)….if you are in the business of buying and selling assets; which many are and they are not so called hedge funds.
Circling back to CT. I don’t believe CT has its own distinct tax policy on carry income, but I do believe that if it existed it would quell hedge fund job creation.
Hasn’t anyone here done their own taxes? Ct. taxes all income the same. The same. There is only one category, with none of the Federal deductions allowed. You take the number off the bottom of the first page of the 1040. Ct. loves capital gains. It’s just more income for them to tax at the same rate.
So, no Ct. doesn’t have a distinct policy on carry income. They don’t care.
Damn you guys are lost.
Capital formation is the underlying problem. There is too too much leveraged fiat capitol ‘floating around’.
Restrict the M2- or whatever they call it nowadays- immediatley! While your at it deleverage about 9 T give or take of completly non existant ‘wealth’.
The world is awash in currency -backed in the full faiths of their said govts….what ever the fuck that means.
Unless there is dramaticus fiscal policy change soon -WW3 here we come.
Towny, I see it somewhat differently. There’s a lot of zombie capital parked in dead or underwater assets that have not cleared. The Too Big to Fail banks are only solvent thanks to changes in accounting regs and a lifeline from the Fed. Billion$ in dead capital have not cleared the system. Furthermore, most if not all of the “liquidity” printed by the Fed is to fund public debt here and in Europe, and to prop up the equity markets. When the dam breaks we will need real capital formation.
What you label “non existant (sic) wealth” is not real capital. Debt that can never be repaid—and there’s billions out there—is not capital. It is an illusion. A debased currency is seen less and less as capital, more and more as Charmin. The migration to “safe havens” such as precious metals is a sign that some people don’t view fiat money as capital. Even our Federal Reserve Note is a debt instrument.
What we have seen and continue to witness is capital destruction–deferred in many cases, but real nonetheless. That’s how I see it anyway.
Two points. One, the issue of capital gains versus ordinary income is for Federal taxes, so it will not affect people moving in or out of CT.
Second, anyone who things hedge fund “performance fees” are legitimately capital gains should take a broader look at the question. The fees are earned and available to be spent at the end of the year just like other wage earners. Should we also apply capital gains to investment banker year end bonuses? They are performance based. How about car salesmen on commission? How about any other job where the worker gets incentive pay in addition to base pay, such as waitresses? If you want to lower the tax rate for everyone, fine, but don’t suggest that the hedge fund manager is taking long term risk and deserves a lower tax rate on fees he earns because his clients have taken risk.
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