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.
 

• Passed as Resolution 13 by CFT Convention on March 24, 2019
• Submitted by the Retirement Policy Committee