Protesters target Connecticut’s uber wealthy with ‘tax bills’ in bid to end loophole


Even Trump has said Greenwichs hedge fund guys get away with murder but can this debt-ridden state afford to close the loophole known as carried interest?

Just emerging from their blanket of winter snow, the lush and leafy lanes of Greenwich, Connecticut, are usually quiet on a Saturday morning. Behind high walls and long drives sit the manicured mansions of some of the worlds richest people. After a long week making more millions, the last thing the residents want is the help disturbing their beauty sleep. This weekend, though, was different.

On Saturday morning, a coachload of local workers, bullhorns in hand, took to Greenwichs windy lanes for a protest organized by union-backed local community groups and billed as the Lifestyles of the Rich & Shameless bus tour.

Chanting El pueblo unido / Jams ser vencido (The people united / Will never be defeated) and Hey hey, ho ho, tax loopholes have got to to, a couple of dozen protesters, gently shepherded by local police, left giant tax bills totaling close to $3bn for some of the worlds richest hedge fund managers.

The protesters, and many others in Connecticut, are hoping they can force the state to reclaim such tax from its richest residents as it wrestles with massive debts and prepares to sack thousands of local workers.

The estate belonging to billionaire hedge fund owner Stephen Cohen, located in Greenwich. Photograph: Vincent T Vuoto/AP

The atmosphere was light. What do you think they are eating for breakfast? Cantaloupe and cottage cheese? joked Luis Luna, an organizer from Make the Road, a community group that helps low-income Latinos in Greenwichs down-at-heel neighbor Bridgeport. No. They are definitely on a cleanse, came the reply. Luna joked about serving lobster and caviar pizza for lunch. The kids squirmed. Its just going to be cheese, someone reassured them.

But while spirits are high, the situation is dire.

Connecticut has a $1.8bn budget deficit. It is in the middle of cutting the 2,500 state jobs that were earmarked as cost savings last year. Governor Dannel Malloy recently unveiled a new budget that seeks $1.5bn in concessions from local workers, including pension cuts. Lindsay Farrell, state director of Working Families in Connecticut, a nonprofit that organized the weekend protest, said the new deal could cost another 4,200 jobs.

The only change is a tax credit on estate taxes, said Farrell.

The hedge fund guys are getting away with murder

Connecticut presents one of the starkest examples of the growth of US income inequality. In their guarded homes, Greenwichs rich have been doing very nicely: from 2009 to 2013, the income of the states top 1% grew 17.2%. The incomes of everyone else dropped by 1.6%.

Bridgeport, with its boarded-up shops and opioid addiction problems, could not stand in starker contrast to ritzy Greenwich, with its antique-car showrooms and Michelin-starred restaurants. Average per capita income is $19,854 in Bridgeport, where 20% live at or below the poverty level.

Charles Khan, an organizer with Strong Economy for All, at the Lifestyles of the Rich & Shameless bus tour protest in Greenwich. Photograph: Dominic Rushe for the Guardian

But thanks to its super-wealthy neighbors, the Bridgeport-Stamford-Norwalk corridor is among the wealthiest regions in the US, according to an American Community Survey (ACS), with nearly one in five households having an income of at least $191,469.

In part, this is due to the states proximity to New York City, global center of finance and a great place to shop and go to the theatre. Connecticut offers the rich a country base, only a short helicopter ride from Manhattan. It also helps that the state is fighting to keep a significant tax break for its richest residents.

Hedge fund managers and other investors pay 19% on the money they earn from their investments less than the 25% US taxpayers owe if they earn between $37,950 and $91,900. Closing that loophole, known as carried interest, would save Connecticut an estimated $535m a year.

The tax break is one that even Donald Trump thinks is unfair. During the presidential campaign, he railed against it. The hedge fund guys are getting away with murder, he told CBS. Dumping carried interest had therefore been expected to be part of his plan to reform the USs byzantine tax regime, a plan he has promised to pursue now his healthcare plans have fallen so flat.

Trump: hedge fund guys are getting away with murder.

Since arriving in the Oval Office, however, Trump has been quiet about carried interest. He appointed a cabinet full of Goldman Sachs executives, said Farrell. I dont think there is much chance of action at the federal level or that he was ever all that sincere.

In the meantime, Farrell and co have taken to the (least) mean streets of Connecticut, to take action at the local level. Greenwich police, who are facing cuts too, let them leave a $446m bill outside the 35,000 sq ft mansion of Steve Cohen, founder of Point72 Asset Management and SAC Capital Advisors. Cohens net worth is an estimated $13bn; his $1bn art collection could almost plug Connecticuts budget hole on its own.

At Hill Road, close to Alpha Drive (a dead end, the sign informs us), protesters left a $1bn bill for William Macaulay, boss of energy investor First Reserve Corporation, and another $837m-plus bill at the guardhouse of Ray Dalios mansion. Dalio, boss of Bridgewater Associates which owns bits of many of the USs low-wage employers, including Walmart and Yum Brands, which owns Kentucky Fried Chicken and Taco Bell lives in a gated community. His guard seemed less amused with the protest than the local police.

Im angry

Next month the fight goes to Hartford, Connecticuts capital. State lawmakers dont have the power to rewrite the federal tax code, but advocates are pushing for a bill that would end carried interest in Connecticut.

The bill, HB 6973, would add a local surcharge to the investors tax bill, taking them up to the top tax rate of 39.6%. To stop billionaires swapping one Manhattan commute for another, New Jersey, Massachusetts and New York will consider similar bills.

The hedge fund industry is expected to put up quite a fight but the protesters are confident too. On the last stop of the tour, they inflated a giant pig outside the offices of AQR Capital Management, an investment firm that received a $35m state handout after it threatened to leave Connecticut. AQRs founder is Cliff Asness, a hardcore libertarian with a $3bn fortune who believes blame for the financial crisis rests squarely on all-intrusive government intervention.

Im angry, said Mark Krauchick, a school janitor and president of the local American Federation of State, County and Municipal Employees who earns $48,000 a year and whose pension is under threat from the new cuts.

We have to have the courage to act, he said.

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