In this season of reform, you can't blame politicians from pondering ways to wring more revenue from hedge funds (hedge fund news). But it's not as easy as they might think. The hedge fund industry so far has escaped various attempts to raise revenue on their backs. But more attempts are no doubt coming. 

Consider the move by the New York State legislature to raise taxes on hedge fund managers who commute into New York. That trial balloon already seems to be deflating, barely a day after it was floated. The idea of taxing the "carried interest" as ordinary income, not capital gains, generated immediate criticism, and Gov. David Patterson is retreating quickly. The biggest objection seems to be that more hedge funds will simply leave the state. Connecticut Gov. M. Jodi Rell sent a letter to the New York Hedge Fund Roundtable, suggesting that New York-based hedge funds join their peers in her state to escape the tax. 

The New York legislature has yet to vote on the bill that includes the tax, part of a proposed $136.5 billion budget. But some influential opponents have weighed in. NYC Mayor Michael Bloomberg is opposed to the idea and hardly shy about it. He called it the best thing that ever happened to Connecticut. He also noted that "hedge funds are a bunch of desks with terminals on them. They could go anyplace. We've lost a lot of business to Connecticut and this would send more of them." 

But the temptation to hit hedge funds for revenue reaches far beyond New York and Washington.

In the United Kingdom, for example, bonuses paid to senior executives at hedge funds (and investment banks) will be subject to new rules and regulations under new EU-wide guidelines that have apparently been approved by members countries. The new rules allow only 30 percent of any bonus for bankers and fund managers to be paid in cash; the limit would fall to a fifth for large bonuses. At least half of the total bonus must be paid in shares tied to performance. And a portion of the bonus would be deferred, with individual countries setting the rules on this. This may be the first time hedge fund pay is regulated in the country. 

It's not going over well. Already there is talk of some hedge funds relocating to more tax-friendly countries outside the EU, such as Switzerland , notes the BBC. - Jim