Despite two major tax increases on business in the recently finalized FY2021 budget, an Assembly committee will discuss on Monday a controversial bill that would impose a new hike on electronic stock trades processed in New Jersey.
The bill, A-4402, was introduced in July by Assemblyman John McKeon. It calls for a quarter-cent tax on every financial transaction handled by electronic infrastructure in New Jersey – which could potentially generate billions of dollars in revenue for the state.
While McKeon and Senate President Steve Sweeney have already acknowledged the rate will be amended, the tax has the support of Democratic leadership in the Legislature and Gov. Phil Murphy.
Expectedly, the New York Stock Exchange (NYSE) and NASDAQ, have warned they will pull their servers out of New Jersey or process their trades through systems outside the state if the tax comes to fruition.
NJBIA Vice President of Government Affairs Christopher Emigholz said the risks of losing the exchanges could be avoided with the rewards found in oft-recommended structural reforms.
“This tax would be another dagger to our competitiveness and our business reputation,” Emigholz said. “These exchanges can, and will, be mobile if they need to be. If they leave, losses in New Jersey jobs and tax revenues will go with them.
“If they stay, everyday investors will bear the added costs. There is also the potential that a transaction tax could adversely impact pension funds, IRAs, 401K plans and college savings plans for New Jersey residents.
“If policymakers believe this new tax revenue is needed to avoid the fiscal cliff after the bond revenues are gone, we reiterate that New Jersey needs to finally commit to the impactful and necessary structural reforms found in the Path to Progress report. Shortly after the FY2021 budget was finalized with excessive spending, borrowing and taxing, our leadership said they would make that commitment to serious reforms. These are the steps we should be taking, not more taxes.”
Whether this proposal becomes a game of chicken between New Jersey’s leadership and the powerful exchanges remains to be seen. The NYSE has already conducted a test out of Chicago to show it can use backup servers there for trades. Texas Gov. Greg Abbott confirmed earlier this month that his state was in discussions with NASDAQ about relocating its trading systems from New Jersey to the Dallas area.
Senate Democrats have reportedly hired Paul Hastings LLP, a Washington, D.C.-based law firm to help design the proposal.
Sweeney has also said the proposed financial transaction tax would be temporary. However, the same was also said for a New Jersey corporate business tax increase that already began its sunset. Instead, it has been increased to become the highest in the nation, starting on Jan. 1, 2021.