Could a quarter-penny tax on stock trades help NJ’s budget gap?
As the cash-strapped, COVID-stressed state looks for ways to avoid deep cuts in its budget, an unorthodox proposal has been put on the table by one lawmaker – a quarter-cent tax on financial transactions conducted through high-quantity processors.
Many Wall Street trading companies run their high-speed trades through computer server farms in North Jersey, in warehouses in places such as East Rutherford, Mahwah and Secaucus. Assemblyman John McKeon, D-Essex, said a small tax on them could raise big bucks.
“We’re all looking for revenue sources, understanding the devastation that COVID has brought on a lot of levels but particularly to our state budget,” McKeon said.
“We’re talking maybe about a quarter of a penny on each transaction, and considering the gross volume of transactions that happen on Wall Street and particularly the ones that happen in New Jersey, it could lead to billions of dollars of revenues which would be very well-timed under any circumstance, let alone now,” he said.
The bill, A4402, was introduced in mid-July. It’s not clear if it will be among the ideas Gov. Phil Murphy includes in his budget proposal for the nine-month 2021 state budget, which he will present to the Legislature on Aug. 25. McKeon said the administration is open to the idea.
McKeon said there are three reasons Wall Street firms run trades through North Jersey servers.
“Number one that it’s more secure. They’re able to do it in a safer way than having things in Manhattan. Secondly, it’s less expensive,” McKeon said. “And third, it’s proximate to the point – and this is what’s really key – that although a millisecond doesn’t seem like a lot of time, it is as it relates to financial transactions. You want to be, so to speak, first in line.”
“So why not be paid, so to speak, for the benefit that we’re providing to the financial markets?” he said.
The Tax Foundation says the tax would lower the portfolio value of all investors by lowering the price of assets, not to mention penalize people saving for retirement in 401(k) plans. It also contends that it would be relatively easy to move the trades out of New Jersey, perhaps to the Chicago Stock Exchange, to avoid the tax.
McKeon said he doesn’t think that would happen because it would be costly and the companies would be at a disadvantage if high-speed trades aren’t initiated as close to Wall Street as possible.
“They need to be as close as they do. If that wasn’t to their advantage, they wouldn’t be,” McKeon said. “They’d go out to Iowa or overseas or whatever it may be, which would be cheaper for them. But they can’t. Well they could, but they wouldn’t.”
“I hold no animus, so I don’t mean to give that impression, that Wall Street’s evil or otherwise,” he said. “It’s just that number one, they can afford this. It’s a pittance on these transactions where people are making multiple millions of dollars.”
Michael Symons is State House bureau chief for New Jersey 101.5. Contact him at firstname.lastname@example.org.
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