Legislators in New York are considering a proposal that would further tax out-of-state hedge fund managers.
The move would bring in an additional $50 million yearly, reported Reuters. The proposal, which received support from Governor David Paterson and state lawmakers, would force managers who work in New York but live in nearby states to pay the ordinary tax rate on certain income.
Currently, hedge fund managers pay the standard capital gains tax on any profit they bring in from their business. The state proposal would reclassify that compensation as ordinary income and tax it at a rate as high as 35 percent for many managers, reported the New York Times.
Since most hedge fund managers already have their earnings taxed as investment income in their home state, New York's proposal could result in many seeing the same profits taxed twice in two states, opponents have told the Times.
"It could be one more reason to move" one's business out-of-state, tax lawyer Richard Zarin told the Times.
In 2009, the maximum capital gains tax was 15 percent, although special capital gains can be taxed as high as 28 percent, according to the Internal Revenue Service.
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