Millionaires advocate for higher tax on wealthy money managers

Patriotic Millionaires Chair Morris Pearl and a group of fellow millionaires press for legislation to close tax loopholes that provide Wall Street money managers with preferential tax treatment on the Million Dollar Staircase in the State Capitol Monday Mar. 7, 2016 in Albany, N.Y. (Skip Dickstein/Times Union)

A group of millionaires is on board with higher taxes on the rich.

Patriotic Millionaires, a group of self-described high-net-worth Americans, is backing a proposal that would close the so-called carried interest loophole. A federal effort to shut the loophole has stalled.

The state-specific proposal calls for a higher tax rate for those who benefit from carried interest to make up the difference between the tax rate on wages and the tax rate on gains. To maintain geographic competitiveness, such a rate would be enacted in concert with other states in the Northeast and elsewhere.

Carried interest is a performance fee (usually 20 percent) that money managers collect on gains from their funds above a certain amount. The problem, according to advocates and lawmakers, is that the tax rate on the carried interest (20 percent) is far lower than the ordinary income tax rate (39.6 percent).

"There are few words that offend taxpayers more than 'loophole,'" Leo Hindery Jr., managing partner of InterMedia Partners VII, LP, said from the Capitol's Million Dollar Staircase (and no, the location choice was not a coincidence). "This is a giant, giant loophole. This loophole costs our federal treasury about $10 billion to $12 billion a year, one-third or more of which is here in the state of New York."

Bill language for New York was to be introduced on Monday, with plans to have legislation introduced in other states soon after lawmakers elsewhere seen the New York bill, said Strong Economy for All Executive Director Michael Kink.

The plan is to set up the tax so its enactment dovetails with equivalent mechanisms in other states. The aim is to score legislative approval in New York, California, Connecticut, Illinois, Massachusetts, New Jersey and Pennsylvania and prevent top earners from moving to another nearby state to escape the higher tax rate.

"We're in it for the long haul," said bill sponsor Assemblyman Jeffrion Aubry, D-Queens. " … If it takes a year, two years or three years, it's the right thing to do."

On the micro level, the Assembly is poised to consider a higher tax rate for millionaires under an proposal that would modify New York's income tax brackets and rates.

That proposal, which has drawn the ire of Republicans who control the state Senate and has been met with a cool response from Gov. Andrew Cuomo, is supported by the Patriotic Millionaires. Two of the three members of the group who flew to Albany on Monday in a private jet (another deliberate move) are New Yorkers who would be impacted by that legislation.

"We're citizens who just believe in progressive taxation, and we destroyed that 30 years ago by will," Hindery said. "It's time for this nation (to) take it back, restore the progressive taxation that built this nation. And we'll all be a lot happier and a lot wealthier — with a small 'w' this time."

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