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New York Gov. Andrew Cuomo. Photo by Nicholas Hunt/WireImage

New York is proposing state legislation that would increase taxes on managers of hedge funds and other private investment partnerships, after Congress and President Trump failed to do so via the recent federal tax bill.

Bottom line: New York only will move forward if it can get agreement on similar bills in Connecticut, Massachusetts, New Jersey and Pennsylvania.

Facts Matter: Taxing carried interest

Carried interest is currently treated as a long-term capital gain by the federal government, which means it is generally taxed at 20%. Ordinary income for top earners is taxed at a 37% clip. The proposed bill in New York, therefore, would basically be a 17% tax increase that Gov. Andrew Cuomo calls a "fairness fix."

It would apply to certain investment profits earned not only by hedge fund managers, but also by managers of private equity, real estate and venture capital funds. There already is a small capital gains surtax in New York City, but state budget director Robert Mujica tells Axios that the bill should not end up costing a fund manager in Manhattan more than one in Buffalo.

"We've been talking about this for a while, but are doing it now because this is the time when the whole tax code is getting looked at," adds Mujica, who says he expects carried interest to be a standalone bill, rather than part of a broader package that is being designed to mitigate unfavorable changes to state and local tax deductions.

But, again, New York wants regional buy-in before moving. "We're talking to the other states now," Mujica says.

  • It's worth noting that one of the states (Massachusetts) is led by a governor who previously worked for a venture capital firm, while another (New Jersey) has a governor whose prior career at Goldman Sachs included regular work with hedge funds.

Go deeper

Mike Allen, author of AM
9 mins ago - Economy & Business

America on borrowed time

Illustration: Aïda Amer/Axios

Economic recovery will not be linear as the world continues to grapple with the uncertainty of the pandemic.

Why it matters: Despite being propped up by an extraordinary amount of fiscal stimulus and support from central banks, the state of the global economy remains fragile.

Scoop: Gina Haspel threatened to resign over plan to install Kash Patel as CIA deputy

CIA Director Gina Haspel. Photo: Win McNamee/Getty Images

CIA Director Gina Haspel threatened to resign in early December after President Trump cooked up a hasty plan to install loyalist Kash Patel, a former aide to Rep. Devin Nunes (R-Calif.), as her deputy, according to three senior administration officials with direct knowledge of the matter.

Why it matters: The revelation stunned national security officials and almost blew up the leadership of the world's most powerful spy agency. Only a series of coincidences — and last minute interventions from Vice President Mike Pence and White House counsel Pat Cipollone — stopped it.

Updated 13 hours ago - Politics & Policy

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