Democrats in recent years have positioned themselves as critics of income inequality, yet one of the nation’s most solidly Democratic bastions is New York state -- a deep blue stronghold that evinces the second-highest rate of income inequality in the nation. A report released Wednesday offers one possible explanation for the apparent discrepancy: campaign cash flowing to New York politicians from the financial industry.

Hedge fund managers and executives have made nearly $40 million in contributions to political candidates and committees in New York since 2000, according to a paper from the Hedge Clippers, an online group backed by a coalition of labor unions and community organizations.

Democratic Gov. Andrew Cuomo has been the top recipient of this money, taking in $4.8 million in donations tied to hedge funds during his time as state attorney general and governor, the report found.

The Hedge Clippers analysis argues that the massive sums from the hedge fund industry have helped create a system where wealthy individuals pay “nowhere near their fair share” due to tax policies that favor the rich, including a low tax bracket on upper-income earners and on “carried interest” profits, as well as the recent elimination of the “alternative minimum tax.”

In 2010, the New York legislature passed an executive budget proposal offered by Cuomo’s predecessor, Democratic Gov. David Paterson, that was supposed to end the “carried interest” loophole -- which allows hedge-fund and private-equity managers living in other states and working in New York to avoid paying state income taxes on investment profits. However, lawmakers quickly passed a bill that repealed the “carried interest” provision, after Connecticut tried to lure hedge funds to move from New York. Cuomo has not included similar language in his executive budget proposals.

In addition, the report from the Hedge Clippers says that last year, as part of Cuomo’s tax reform package, lawmakers ended the “corporate minimum tax,” which might “result in some very large corporations paying a minuscule amount of tax relative to the volume of business they conduct in New York.” Cuomo also ended the state’s bank tax and killed an effort by New York City Mayor Bill de Blasio to raise taxes on millionaires. In the past, Cuomo has sought legislation to expand the financial industry’s involvement in public works.

Richard Azzopardi, a spokesman for Cuomo, did not answer questions about the report's findings but defended the governor's record on taxes in an email to International Business Times.

"From day one, Gov. Cuomo has sought to lower taxes for all, including implementing the lowest middle-class income tax rate since 1953, as well as capping, freezing, and now cutting property taxes -- the most burdensome tax for millions of New Yorkers," Azzopardi said. "As the governor has said, New York has no future as the high-tax capital of the world."

The Hedge Clippers report says that Cuomo’s reelection campaign benefited from a loophole in New York campaign finance laws that allows wealthy donors, such as hedge fund executives, to exceed contribution limits by giving through multiple companies. (One New York real estate developer, who’s at the center of a federal corruption probe, managed to give $1 million to Cuomo’s campaign last cycle by routing donations through 27 limited-liability companies.)

Azzopardi told IBTimes that "closing the LLC loophole is among the many reforms that the governor has proposed in this year's budget."

After Cuomo, the second-largest recipient of hedge fund-contributions was New Yorkers for a Balanced Albany -- an independent expenditure committee created by the pro-charter school group StudentsFirstNY -- that spent $4.2 million to help Republicans take control of the state Senate.

In November, the campaign manager for Rob Astorino, the Republican who ran against Cuomo last year, publicly charged that Cuomo cut a deal with Senate Republicans, letting them win in exchange for not supporting Astorino. Cuomo and New Yorkers for a Balanced Albany shared a number of common donors, according to a report published in December by Zephyr Teachout, who ran against Cuomo in the Democratic primary.

Since winning reelection, Cuomo has supported a number of initiatives favored by StudentsFirstNY, including making teacher evaluations tougher and expanding the number of charter schools allowed to operate in the state.