Mayor Bloomberg is warning that a new tax-the-rich scheme targeting hedge funds, private equity firms, and real estate partnerships in New York City would drive wealthy taxpayers from the city.
Mr. Bloomberg, speaking for the first time about the new tax proposal, said yesterday that the first rule of imposing taxes should be: "Don't try to raise the taxes on those who could pick up and move out tomorrow, because you won't get even what they've been paying."
"I can't think of a group that is more portable, actually, than hedge fund managers. Or some of these private equity firms, they could move to Connecticut overnight," he said, responding to a question from The New York Sun. "So, you know, raising their taxes is not something that is probably practical."
The tax proposal, which would require general partners of hedge funds, private equity firms, and real estate partnerships to pay local business income taxes on their share of profits generated by investments, is backed by labor leaders, members of the Working Families Party, and at least nine City Council members, all of whom rallied on the steps of City Hall on Tuesday in support of the measure. The executive director of the Working Families Party, Daniel Cantor, said the tax plan also has the support of several Albany lawmakers.
If approved in the capital, the crafters of the plan say it would raise an estimated $200 million a year, which supporters say could help pay for libraries, public transportation, and education.
The mayor said the city's revenue projections should come into better focus next week, but noted that Wall Street profits have declined.
"And that we'll see in terms of less taxes that the companies pay and less income taxes from people who work in those companies," he said. He has called for the budgets of all city agencies to be cut.
Mr. Cantor said yesterday he was disappointed the mayor is opposed to the tax plan, and argued that hedge fund managers and others wouldn't flee the city if it went into effect.
"The mayor was not afraid to raise taxes in 2003 when that was called for to keep the city strong, wasn't afraid to call for a congestion pricing tax, which is basically what it was, wasn't afraid to extend this quite regressive 1% sales tax. And he should not be afraid to ask the wealthiest, the absolutely wealthiest new Yorkers to do their fair share," he said.
The plan comes on the heels of a failed proposal backed by Assembly Democrats to raise the personal income tax rate of New York State residents who earn more than $1 million, a proposal known as the millionaire tax, which had been projected to bring in $1.2 billion in tax revenues.
Mr. Cantor said the new tax could be called the "multimillionaire tax." He called on hedge fund managers and others to pay the tax voluntarily, saying that would be "the decent and right thing to do." Mr. Bloomberg said yesterday that people have a right to structure their affairs to minimize their tax bills, so long as they follow the law. "In fact, the law wants you to do that. That's how we use tax law to incentivize people," he said.
The president of the Hedge Fund Association, David Friedland, predicted that hedge fund managers would leave the city if they were singled out by a new tax.
"If you are going to penalize hedge fund managers, you can rest assured you aren't going to have hedge fund managers setting up shop in New York City," he said. The mayor voiced support yesterday for the so-called Amazon tax, which will require New York City shoppers to pay an additional 8.375% on goods from many online retailers based outside of New York.
"I think to give a tax break to Internet transactions at the beginning was an intelligent policy because it made a new method of communications and information sharing and commercial activity viable," he said yesterday. "I think at this point in time, however, it is a system that can stand on its own, and transactions should be taxed the same way as if you go into a store."