The Wall Street Journal opines about the latest bone-headed move by New York politicians to drive away productive activity. Connecticut is not exactly a low-tax jurisdiction, but sometimes being less worse is all that’s necessary to win a tax competition battle.
Connecticut Governor Jodi Rell, a Republican who usually doesn’t mind higher taxes…has nonetheless declared a tax-competition border war amid the New York Assembly’s bid “to vastly increase the tax liability of hedge fund professionals who work in New York.”
That’s how Mrs. Rell put it in a letter last week to the New York Hedge Fund Roundtable, imploring its members to relocate to her state and offering to do “anything possible to assist you,” including the aid of state “relocation specialists.”
…Arguably the hallmark of bad decision-making is whatever they cook up in Albany—which is planning to tax the carried interest income of New York-based hedge fund managers who live out of state at the top ordinary tax rate of 8.97%. …[T]he New York Assembly…thinks it can raise $50 million by targeting bridge-and-tunnel commuters to Manhattan too.
It never will, given the mobility of capital. New York City Mayor Michael Bloomberg—who knows the combined city-state top tax rate approaches 13%—told the New York Observer that “I think it’s the best thing that ever happened to Connecticut. I can’t imagine why every hedge fund wouldn’t pick up tomorrow and move.”
…Last September—after years of tax-hike plans that fell through—Mrs. Rell and the Democratic legislature raised the top income tax rate to 6.5% from 5% on filers making more than $500,000. The state’s combined state-local tax burden of 11.1% is the third highest in the nation, according to the Tax Foundation, after New York (No. 2) and New Jersey (No. 1).
Those sins duly noted, Mrs. Rell is nonetheless right in this case, and you can expect a further migration to the Nutmeg State from the economic nut house that is New York.
