Critics are warning that a proposed tax on New York City hedge funds, private equity firms, and real estate partnerships could drive businesses to other cities.

Nine City Council members, along with labor leaders and members of the Working Families Party, rallied at City Hall yesterday in support of a proposal to raise taxes on the city’s financial managers. Proponents estimate that the tax, first reported in yesterday’s New York Sun, would generate about $200 million a year in revenue for the city, while opponents say it could lower the tax base by pushing businesses out of New York and weaken the financial services industry, which is key to New York’s economy.

“Money is mobile,” the president and CEO of the Partnership for New York City, Kathryn Wylde, said. “These guys are not real estate operators, they’re not a utility. There is nothing that makes them stay in New York.”

Under the proposal, developed by the Fiscal Policy Institute, general partners of a hedge fund, private equity firm, or real estate partnership would be required to pay the city’s unincorporated business tax on income derived from carried interest — profits generated by investments the partners did not initially fund.

A similar plan floated in Congress last year, with support from Rep. Charles Rangel, who represents parts of Manhattan, and Senator Clinton, was dropped from a tax bill. Senator Schumer initially was opposed to the tax but later proposed a plan that included a tax hike on hedge fund managers.

In New York, the proposed hedge fund tax follows a failed bid by state lawmakers earlier this year to pass a “millionaire’s tax” that would generate $1.2 billion a year by raising the personal income tax on residents who make more than $1 million a year. Mayor Bloomberg opposed that tax, warning that it would drive wealthy taxpayers to leave the city and invest elsewhere.

Council Members Melissa Mark-Viverito, Darlene Mealy, Hiram Monserrate, Annabel Palma, James Sanders Jr., John Liu, Letitia James, Robert Jackson, and Tony Avella attended the rally yesterday and said they would introduce a resolution calling on Albany to pass the tax.

“We need money for libraries, we need transit, we need schools — these are the things that make New York worth living in,” the executive director of the Working Families Party, Dan Cantor, said at the event yesterday. “Even though those wealthy buy their way out these problems, we’re saying to them, ‘No, we’re all in the same boat here, and we’re going to demand they pay their fair share.'”