Press release from the Working Families Party, 4/15/08

Unions, Elected Officials, Working Families Party: End NYC Tax Giveaway to Wealthy Financial Barons

Low- and middle-income taxpayers pay their share while rich investment fund managers get a pass, NY struggles with deficits

NEW YORK – Labor unions, the Working Families Party, elected officials and tax-burdened small business owners and workers demanded Tuesday that New York City close a tax law loophole which allows wealthy private equity and hedge fund managers to avoid paying their fair share while low- and middle-income New Yorkers pick up the tab.

Closing the loophole in the Unincorporated Business Tax (UBT) could save New Yorkers as much as $225 million a year, more equitably balancing the tax burden between low- and middle-income tax payers and wealthy private equity and hedge fund managers who pay a lower portion of their income to taxes. Supporters of the proposal to close the loophole said Tuesday that, as the City and State approach massive budget deficits over the next few years, we can no longer afford such irresponsible and unfair giveaways to the wealthiest New Yorkers.

"As working people are paying pay more and more of their income in taxes, some of the wealthiest New Yorkers are not paying their fair share," said Dan Cantor, Executive Director of the Working Families Party. "It’s got to stop. Closing this loophole would give New York City’s budget a badly needed boost. It would also help make the tax system fairer by shifting the burden back to those with the greatest ability to shoulder it."

"The carried interest exemption lets many ultra-wealthy private equity and hedge fund managers pay a lower effective business income tax rate than thousands of smaller businesses," said James Parrott of the Fiscal Policy Institute and author of a new report that estimates what this loophole costs New York City. "It's time for city and state lawmakers to level the playing field for the average business and stop throwing favors at the fortunate few."

"Private equity firms should pay their fair share in taxes just like other companies in other industries," said Mike Fishman, President of Local 32BJ SEIU -- the largest private sector union in New York. "Giving some wealthy investors their own special tax loophole is unfair to working New Yorkers and undermines the tax base that all New Yorkers count on to provide essential public services."

New York City businesses and partnerships that are not incorporated pay the Unincorporated Business Tax (UBT) instead of the General Corporation Tax (GCT) or the Bank Corporation Tax (BCT) paid by incorporated businesses. Currently, however, unincorporated businesses in the financial sector such as private equity and hedge funds benefit from an exemption that allows them to avoid paying the UBT tax on a significant portion of their profits.

Unincorporated financial institutions in New York are not taxed on “carried interest” – their share of the profits generated from their investors’ capital – even though this profit serves as a performance fee, often millions of dollars worth for private equity and hedge fund partnerships.

Low- and middle-income workers, and SEIU and Working Families Party leaders were joined today by Council Members Melissa Mark Viverito, Darlene Mealy, Hiram Monserrate, Anabel Palma, James Sanders, John Liu, Leticia James, Robert Jackson and Tony Avella.