That’s exactly what is going on in New York state. As part of the negotiations to close the state budget gap, Gov. David Patterson agreed to provisions that would add an extra tax on hedge funds and private equity firms that do business in the state. The governor said he had no choice because he needed to get other revenue raising measures through.
So, enter Connecticut Gov. M. Jodi Rell. In a letter to the New York Hedge Fund Roundtable, Rell made it clear she would welcome any fund managers who wanted to pack their bags and come do business in her state – without the threat of that extra tax looming over their heads.
Patterson today, perhaps realizing the implications of that, finally, said he wants to revisit and reconsider that tax. The populist notion of going after the rich could backfire if funds leave the state – and in fact could leave New York with a bigger budget problem.