A bill before the Connecticut General Assembly's Finance, Revenue and Bonding Committee would place a tax on hedge funds. For some Democrats in Connecticut, the idea is simple: hedge funds have the money and they already get a tax break, so the state could plug budget holes with a 19 percent surcharge on investment companies.
Supporters of the bill, including Committee Vice Chair Rep. Josh Elliott of Hamden, say it would raise $535 million a year, and effectively close the tax loopholes investment managers get from the federal government.
The problem is, according to critics, if you tax the hedge funds, they will leave the state. Democratic Governor Dannel Malloy has come out against it for that reason. Critics also say hedge funds aren't as flush as they used to be.
"Computer programs are taking over trading, firms are starting to lay off staff," said Bruce McGuire, president of the Connecticut Hedge Fund Association.
Hedge funds have been experiencing a bloodletting lately. There have been layoffs and closed funds. Last year, investors pulled $100 billion from hedge funds as they look toward cheaper index funds. That's still a fraction of what the entire industry is worth.
Meanwhile, in Washington...
In two weeks, House Republicans say they will introduce their legislation that would end Dodd-Frank, the 2010 law aimed at reforming the financial system.
Members of the House Financial Services Committee got their first peek at the revised Choice Act. This latest version is far more aggressive than previous drafts.
"Trump personally has indicated his support for tearing down the protections that we put in place," said Marcus Stanley, Executive Director of Americans for Financial Reform. "I think that must have emboldened the House Republicans."
The Choice Act would curtail the powers of government agencies that watch over banks and other financial institutions. With less scrutiny, banks could theoretically make more loans and grow the economy.
But progressives worry it could give Wall Street free reign and hurt Main Street Americans.
