New York State could eliminate its $3.5 billion budget deficit — money that could help bolster schools, health care and other social needs — if state lawmakers closed the carried interest loophole favoring private equity and hedge-fund managers, said labor and civil rights leaders at an Albany news conference on Feb. 14. “This is a matter of fairness and the common good,” UFT President Michael Mulgrew said. “Those who benefitted the most from a booming stock market should not be able to shield their earnings through this loophole.” State Sen. Jeff Klein, who convened the press conference, has introduced legislation to close the tax loophole. Carried interest is the income flowing to the general partner of a private investment fund for management services. That income is treated as long-term capital gains as opposed to regular income for tax purposes. According to a new report released on the same day by Klein and the Independent Democratic Conference, managers of private equity and hedge funds are taxed at a much lower rate for this income — 20 percent — and not the 39.6 percent rate they would pay if the loophole were closed. By comparison, a teacher in a household earning between $75,000 and $153,000, married and filing jointly pays the 25 percent tax rate.