Hedge fund tax

Connecticut Gov. Jodi Rell is courting New York's hedge fund managers.

Seeing an opportunity for the Nutmeg State in a proposed $50 million tax hike on some managers, Gov. Rell has invited them to dine with her.

In a letter to Timothy Selby, president of the New York Hedge Fund Roundtable, she invited him "and a few of your colleagues to meet with me" for an "intimate, direct and private" gathering Aug. 2 at a restaurant in Darien, Conn., to talk about moving their business to Connecticut if New York approves the proposed tax hike.

New York taxes nonresident hedge fund managers on their base salaries. "Carried interest" or performance-based incentive is taxed in their home states. The proposed tax hike would change the laws to tax the carried interest as ordinary income in New York as well. Opponents say it amounts to double taxation for hedge fund managers who live in neighboring states.

And Gov. Rell isn't missing a chance to make that point.

She had already put out the welcome mat in a previous letter to Mr. Selby inviting him and other managers to relocate their business to Connecticut with an offer to help find offices, homes and schools. Mr. Selby has noted that hedge funds could easily relocate and with them could go jobs and tax revenue.

New York City Mayor Michael R. Bloomberg has called the tax plan "the best thing that ever happened to Connecticut."

The New York Post quoted an unidentified fund manager estimating the cost of the proposed tax hike at $200,000 to $1 million a year for his employees. "If this thing goes through, I'll probably end up in Greenwich by February or January," the manager said.

Other tax hikes such as the surcharge on wealthy by creating an unfriendly business climate have reportedly pushed investors and businesses to move out of state. Albany has yet to approve the hedge fund tax plan, but if it does, Gov. Rell is making it clear that Connecticut will be a more hospitable place to do business.