
chasing more tax payers out of the state , here is a clue you dont have to live in Jersey to run a hedge fund
JOHN REITMEYER | JUNE 9, 2017
Performance fees earned by hedge fund managers are taxed at a far lower rate than personal income. The difference to NJ: as much as $100M annually
Lawmakers in the state Assembly gave their final approval yesterday to a bill that would establish a new tax in New Jersey to make up for what many consider to be a federal loophole that delivers a huge break to Wall Street fund managers.
Portrayed by supporters as an issue of basic fairness, the legislation would levy a hefty new tax on performance fees earned by managers of hedge funds and private-equity funds that are commonly referred to as “carried interest.”
The performance fees, under current federal rules, are generally taxed as capital gains instead of as individual income. The difference can provide huge savings for fund managers because of the higher tax rates that the federal government levies on personal income compared with the rates on capital gains.
New Jersey could generate $100 million or more in new revenue according to some estimates by establishing a state tax on the performance fees. The legislation, however, would also need to be passed in several other neighboring states to go into effect in New Jersey. If it were enacted only in New Jersey, it would be an open invitation for fund managers to move to a nearby state with a friendlier tax environment.