Call for California to tax all income subject to the federal carried interest tax break
March 24, 2019

Post

Whereas, private equity firms, hedge funds, and other financial entities make exorbitant fees for investing other people’s money; and

Whereas, the owners of these firms receive up to 20 percent of the profits on these investments of other people’s money as “carried interest”; and

Whereas, the federal government taxes carried interest at only 20 percent; and

Whereas, regular income received by high-income private equity and hedge fund managers would face a tax rate of 37 percent; and

Whereas, many financial experts and working Americans agree that millionaires and billionaires should not receive preferential treatment on their taxes; and

Whereas, this preferential treatment of carried interest costs the federal government an estimated $18 billion per year; and

Whereas, the GOP tax legislation passed in 2017 expands even further the tax breaks available to those with incomes greater than $1 million; and

Whereas, education at all levels in the state of California is underfunded as a result of a lack of tax revenues; and

Whereas, the legislature in the state of New York has introduced legislation to tax all carried interest income at a rate of 17 percent, which is the difference between the 20 percent and 37 percent federal rates; and

Whereas, if the state of California were to join with the state of New York and implement this same type of tax it would generate an estimated $1.62 billion in revenue;

Therefore, be it resolved, that the CFT call for the state Legislature to join with the state of New York and a coalition of other states to implement a statewide carried interest tax of the percentage difference between the federal capital gains tax rate and federal tax rate on ordinary income.