Councilman Green hedges his bets on hedge funds

Posted: March 22, 2012

WHY DID City Councilman Bill Green sponsor a bill that exempts private investment or hedge funds and their general managers from paying business taxes?

Hedge funds have drawn scrutiny in the wake of the 2008 economic crash, in particular because their managers pay lower levels of federal taxes. But Green, who used to work in finance, says he's not trying to play favorites and is just looking to help the city's economy.

"I anticipate this will create jobs and result in far more revenue," Green said. "The idea is to create jobs and an ecosystem of [investment] funds that invest in the city."

The Nutter administration backs the measure. Revenue Commissioner Keith Richardson testified at a Finance Committee hearing last week that two investment funds were interested in operating in the city, home to at least three other investment funds.

Should investment funds - which invest money in various companies - make the move to Philly, the city would collect wage and other taxes.

"You're going to have high-income employees working for the company," Richardson said last week. "You're going to have not just the business owners, the employees, but you're going to have individuals who may be wanting to invest in the various funds coming to Philadelphia."

Is this bill giving special treatment to a specific entity?

"No, last year we helped everyone who sells goods," said Green. "We really need to eliminate all business taxes. If we continue with the current tax structure, we'll collapse from our own weight."

Last year, Council approved a bill sponsored by Green and Maria Quinones-Sanchez that granted all businesses tax relief by exempting the first $100,000 from the gross-receipts and net-income portions of the business-privilege tax. City-based businesses will pay only the net income tax on revenue sales inside the city, and both parts of that bill will be phased in over three years.

Tax-policy advocate Brett Mandel said that the current tax structure is a mess and that the "city needs to be more welcoming to everybody."

He said Green is trying to make Philly attractive to investment funds.

"I understand the political pitfalls of being helpful to specific [groups], but I understand you have to do something," Mandel said, adding that he wasn't sure if the bill violates state rules that say taxes must be uniform.

City Council will vote on the bill Thursday.


Contact Jan Ransom at 215-854-5218 or Ransomj@phillynews.com.

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