New Report Spotlights CT Billionaires Who Avoid Paying Equal Tax Rates

With more cuts hurting the state’s economy expected to be announced during Governor Malloy’s budget address on Wednesday, a new report by CT Hedge Clippers, a coalition aiming to close the “carried interest tax loophole, profiles some Connecticut’s wealthiest hedge fund and private equity billionaires who’ve exploited the tax loophole, making millions and billions of dollars in lost revenue to the state. All indications from the Governor suggest that he will continue to protect this special class of billionaires, and shift the responsibility of reducing the state’s $1.5 billion deficit onto regular taxpayers and workers once again.

According to the report, “Connecticut is home to a small set of hedge funds and private equity managers who are among the richest human beings on the planet, benefitting from an unfair tax loophole that lets them avoid paying their fair share of taxes.”

The report can be viewed here.

Taxing carried interest fees similarly to how other income is taxed can contribute $520M/yr, and narrow Connecticut’s $1.5B deficit by more than one third, according to the report. [1] A state bill to close the “carried interest” tax loophole was introduced last week by coalition members and 35 legislators, including State Representatives Robyn Porter and Josh Elliott. The bill would recapture lost revenue which should be federally taxed at the  top bracket at 39%, raising badly needed funds for schools, towns, health care and protecting essential public services in Connecticut.

Governor Malloy has opposed the bill, stating, “I don’t think it’s in the best interest of Connecticut to lead that discussion, because we have employers who have large number of employees in our state.” [2] He later stated, “it would be detrimental to the state.” [3]

“Why is Governor Malloy so protective of this class of millionaires and billionaires at the same time he is asking for sacrifices from middle class and low income workers and families,  ? The state lost over 13,000 jobs in the second half of last year following the layoffs and  disastrous cuts affecting the most vulnerable people in our state budget,” said Lindsay Farrell, Executive Director of the Working Families Organization. “Why should financiers get preferential treatment and lower effective tax rates when their investments do not support the economic growth and job creation they did decades ago?”

A recent Atlantic article reported the finance sector is not the major economic engine it once was.[4] According to the Roosevelt Institute, “every dollar of earnings or borrowing used to be associated with a 40-cent increase in investment. Since the 1980s, though, less than 10 cents of each earned or borrowed dollar is invested. [5] This means fewer jobs created and more money winding up as shareholders’ profits, and ultimately, siphoned out of Connecticut’s economy.

Despite a quiet influx of financiers [6] to Connecticut in recent years, business lobby groups continue to stoke fears about businesses and millionaire residents leaving the state if forced to stop paying special tax rates that are lower than those paid by teachers or truck drivers, for example. The evidence flatly contradicts their claim.

According to Connecticut Voices for Children, the number of returns filed by earners with incomes above $1,000,000 increased by 18 percent and their AGI increased by 21.2 percent between 2010 and 2014. This means the millionaire population grew by 18% [7] during a period of time in which investments in Connecticut’s workforce were on the rise.

Who Would Pay in Connecticut: Meet the Billion Dollar Men

The report profiles a handful of the state’s top financiers, their sky-high incomes, lavish spending and how they made their money, which includes gaming drug trials, investments in dirty energy, fossil fuels and junk food, and pillaging of Puerto Rico’s economy.

  • Ray Dalio, Bridgewater Associates, Westport

         Net Worth: $15.9 billion

  • Steve Cohen, Point72 Asset Management, Stamford

         Net Worth: $13 billion

  • Paul Tudor Jones, Tudor Investment Corporation, Greenwich

         Net Worth: $4.6 billion

  • C. Dean Metropoulos, C. Dean Metropoulos & Co., Greenwich

         Net Worth: $2.5 billion

  • Cliff Asness, AQR Capital, Greenwich

         Net Worth: N/A

  • William E. Macaulay, First Reserve Corporation, Greenwich

         Net worth: $1.3 billion

CT Hedge Clippers works to expose how hedge funds & private equity billionaires influence Connecticut government & politics in order to expand their wealth, power, & influence. We tell the stories of people whose lives have been ravaged by the devastating effects of unchecked greed that causes income inequality and decimates our communities. We unmask corrupt politicians, research front groups and special business interests that conspire to exploit workers, amass obscene amounts of wealth, and wreak financial havoc on our economy. And we give voice to business leaders who fight for tax equity and recognize how their success is enabled by the communities that support them.

The Coalition includes Working Families Organization, Make the Road CT, Strong Economy for All, AFSCME Council 4, AFT and AFL-CIO.

Last week, Proposed Bill 6973, an act to close the “carried interest” tax loophole, was introduced with the support of 35 legislators. Similar bills are planned or have been introduced this year in New York, Massachusetts, New Jersey and Rhode Island as part of a regionally coordinated effort between lawmakers.

Sources

  1. Hedge Papers No. 43: CT Billionaires and their Lucrative Loophole
  2. CT Mirror: Malloy Happy to Defer to Trump on Hedge Fund Tax Break
  3. Record Journal: Advocates Says Closing the Tax Loophole Could Create $500 in Revenue
  4. Atlantic: Finance is Ruining America
  5. Roosevelt Institute: Disgorge the Cash: The Disconnect Between Corporate Borrowing and Investment
  6. Greenwich Time: For Norwalk, Bethel and others, Big Momentum in 2016
  7. Connecticut Voices for Children: Alternate Revenue Options