Connecticut Gov. Jodi Rell is going to war, it seems, in an effort to lure New York hedge funds to her state.
Who can blame her?
Albany, after all, attacked first — by moving to wrest millions in tax revenue from her state and New Jersey.
In the end, alas, New York might turn out to be the big loser.
As The Post noted Thursday, Rell’s rolling out the red carpet for hedge-fund bigwigs, offering to meet them over dinner at a fancy Darien steakhouse. She wants to discuss “Connecticut’s advantages” — particularly in the face of Albany’s plan to tax hedge-fund managers who live outside New York.
“I am personally inviting you and a few of your colleagues to meet with me,” Rell wrote in a letter to the New York Hedge Fund Roundtable’s president. ”We have much to discuss.”
Gov. Paterson first proposed the lame-brained scheme for last year’s budget. His idea: to tax “carried interest” (i.e., investment profits) of hedge-fund managers who work here but live out of state.
Such earnings are now taxed by the states where the managers live, not where they work. But Albany, short of cash for its massive spending machine, has now warmed to the plan.
If it passes, Connecticut and Jersey would face a tough choice:
n Do nothing — and leave hedge-fund commuters liable for tax in both their state and New York, a double hit that may well be challenged in court.
n Scrap their own tax — and lose an estimated $50 million in revenue to Albany.
n Try to lure the hedgies out of the city — and skirt the entire mess.
Rell seems to be choosing Door No. 3.
That’s understandable. But if she succeeds, say good-bye to another of New York’s golden geese. The firms would take jobs, business and tax revenue with them.
Which is why Mayor Bloomberg’s furious, calling the tax “the best thing that ever happened to Connecticut.”
“What am I going to say to her?” Bloomberg asked. “Raise your taxes? She’s going to say to me, ‘Hey, bozo, you guys should cut yours.’ ” He’s right.
He’s also been begging major hedge-fund honchos to stay in the city. Final action on the tax is brewing in the Legislature. The uncertainty over it alone is enough to prompt firms to skedaddle.
If they do, though, don’t blame Rell.