Connecticut Governor Urges Lawmakers to Wait for Trump to Tax Hedge Fund Managers

February 1, 2017 James Heinsman In the News

Connecticut Governor Dannel P. Malloy. Photo by U.S. Navy photo by Petty Officer 1st Class Armando Gonzales/Released

Governor Dannel P. Malloy of Connecticut, the nation’s second largest hedge fund state, urged law makers to hold off on eliminating the “carried interest” tax break, which benefits hedge fund managers. He told them it would be more prudent for the law’s liberal sponsors to allow the new President Trump to make good on his campaign promise to void the tax break through federal action.

“I don’t think it’s in the best interest of Connecticut to lead that discussion, because we have employers who have large number of employees in our state,” Malloy said, referring to a hedge fund industry the governor believes is crucial to the state economy. “I just don’t think that’s an area we should stake out.”

Malloy was addressing his concerns to a bill co-sponsored by 35 state legislatures and pushed by Working Families Organization, a union funded lobby group. The sponsors say the abolition of the tax break could result in a $535 million annual boost to the Connecticut treasury by placing a 19 percent surcharge on “investment management service fees.” Hedge funds in Connecticut manage $300 billion in assets, making it the country’s second largest home for hedge funds.

In order to side-step the fear that hedge funds will just move to another state if the carried interest tax break passes, the law states that it will not go into effect unless the nearby states of Massachusetts, New Jersey and New York adopt similar laws. Malloy, however, would like Connecticut to refrain from doing anything, believing that President Trump will handle the issue instead of the states.

“Let him do it,” Malloy said, referring to Trump.

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