I used to wonder why Michael Bloomberg didn’t run for president in 2008. In hindsight, there were many reasons, perhaps chief among them is that being president would not have done anything to pad his resume. And he probably surveyed the political landscape and decided he didn’t need the headaches.
Two years ago, when Bloomberg was in Chicago to receive the CME Group’s Fred Ardetti Innovation Award, I had a chance to meet him. It was after a dinner ostensibly held in Bloomberg’s honor but that bizarrely turned into a fete of Chicago Mayor Richard M. Daley, who was also in attendance.
I was sitting at the Zoo Table with some other reportersâ€”a mix of local and national guys. We were well into the free wine when we noticed that all of the exchange representatives who rose to speak, either to introduce someone else who was speaking, or to make an announcement, praised Daley and his accomplishments. A couple even called him the best mayor in the country. Finally when it was Daley’s turn to speak, and to introduce Bloomberg, he ended his speech by introducing “The Mayor of the Great City of Chicago, Mike Bloomberg.” With a stone face, the reporter from the Financial Times pulled a pen out of his pocket and pretended to write on his napkin. “That’s news,” he deadpanned.
But I digress.
Unfazed by his new title, Bloomberg spoke for about 20 minutes. As the dinner ended and the guests filed out, I waited around while Bloomberg shook hands and chatted amiably with people he probably didn’t know. After about 10 minutes, Bloomberg was suddenly alone. The guests had left and his security detail was in the hallway, outside the banquet room. I approached him, extended my hand and said, “Excuse me, Mayor. I just wanted to say that I used to live in New York and that I voted for you.”
“What neighborhood do you live in?” he asked, smiling.
“I used to live in Brooklyn Heights, but I live here now. I thought your remarks were insightful. It would be interesting if you shared them on a more national level.”
Instantly Bloomberg knew what I was getting at. I was prodding him to see if he’d tell me whether he was going to run for president. As quickly as it began, Bloomberg signaled our conversation was over.
“Nobody needs to hear me lecture them,” he said, turning to leave. “Nice meeting you. Good night.”
And just like in “The Usual Suspects,” like that, he was gone.
I think about that encounter now and then when I see Bloomberg quoted on topics that interest me. Today I saw a story in the New York Observer that quoted Bloomberg thusly on the New York State Legislature’s proposal to tax carried interest.
“I think it’s the best thing that ever happened to Connecticut,” Bloomberg said. “I can’t imagine why every hedge fund won’t pick up tomorrow and leave.”
Neither can I. I am not opposed to taxing carried interest as ordinary income. However, in this particular case, if New York changes the tax treatment of carried interest for managers working in the city but living in New Jersey or Connecticut, and those states do not adjust their tax codesâ€”which already tax carried interestâ€”accordingly, managers will be taxed twice on their carried interest incomeâ€”once in New York and once in their home states.
I can see where New York would tax the income earned in New York of people who work in the state but who live in adjoining states. And likewise I can see where a state of residence would tax income earned from investments by people living within their borders. But just as, say, New Jersey, should not tax income earned by a Garden Stater through a New York-based business when New York is already taxing the same income, neither should two states levy taxes on carried interest. One or the other folks.
And if this proposal goes through, I wouldn’t bet on the states working it out among themselves. A better bet would be that managers subject to the double taxation follow Bloomberg’s adviceâ€”a loose interpretation of his commentâ€”and pack up their New York offices, leaving the state without that income tax revenue, too.