The idea sounds great, in theory. As do all revenue-raisers, the new phrase for tax hikes.
So, when an Assembly committee meets Monday to discuss a new hike on electronic stock trades processed in New Jersey, be ready to hear about this tiny tax will generate billions for the state. How it will go to help “working families.” How it will ensure that Wall Street pays its “fair share.”
Who could be against that?
For starters, Wall Street.
Wall Street firms and executives don’t get rich by being nice or by giving away their profits — however noble the cause.
That’s why the state’s desire to add just a quarter-cent tax (not 25 cents, just one-quarter of one penny) may be too much for Wall Street to agree to. The tax, sponsored by Assemblyman John McKeon (D-Madison) and supported by state Senate President Steve Sweeney (D-West Deptford) and the governor, could raise as much as $10 billion annually, legislators estimate.
But that’s based on a number of assumptions — starting with idea that Wall Street would keep these trades in New Jersey.
This should be the biggest question of today’s hearing: Not if the tax is right — but the chances the state will be able to collect on it.
This isn’t an argument about whether big companies will stay for our educated workforce, culture and location. This is about whether Wall Street firms — which brought many of their back offices across the river to save a few bucks — will take their business elsewhere.
The New York Stock Exchange 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.
The NYSE has explored a move to Chicago, while Nasdaq is in talks to relocate to Texas.
A bluff? That’s the question.
The three leading business associations in the state — the New Jersey Chamber of Commerce, the New Jersey Business & Industry Association and the Commerce and Industry Association of New Jersey — all have come out against the tax.
Chamber CEO Tom Bracken says it’s another example of how the administration treats businesses as a piggy bank rather than a partner.
NJBIA government affairs head Chris Emigholz said the tax would be another dagger to our competitiveness and our business reputation.
Emigholz not only notes potential job losses — and the tax revenues that go with them — but the added costs that undoubtedly be would be passed onto investors if they do stay.
“There is also the potential that a transaction tax could adversely impact pension funds, IRAs, 401(k) plans and college savings plans for New Jersey residents,” he said.
It’s an opinion shared by Modern Markets Initiative, which dubs itself a leading advocacy organization for responsible innovation across the financial markets. See its report specific to New Jersey here.
CIANJ head Tony Russo, in an Op-Ed for ROI-NJ, said the tax could very well be the catalyst for yet another industry to leave the Garden State.
Leading business outlets have questioned the move, too.
Bloomberg, in an opinion piece, called the move “a silly idea” — noting that the revenue estimates may be too high and that similar moves in Sweden and Germany failed so badly that the tax was repealed.
And Investment News raises perhaps the best point: The markets don’t have too move far, they could simply go to Connecticut.
Even one of the governor’s biggest supporters — organized labor — voiced opposition to the plan.
The International Brotherhood of Electrical Workers told the New Jersey Globe the tax could push major employers out of the state, potentially costing IBEW locals in North Jersey a quarter of their annual workload.
Despite this, elected officials appear to favor the plan.
Sweeney, in a tweet on Oct. 10, said:
“It is time for #WallStreet to share in the sacrifices that the residents of New Jersey have made this past year. By issuing a tax on the #microtransactions produced by daily trading, we can pass more financial savings to individuals and raise millions in new state revenue.”
It is time for #WallStreet to share in the sacrifices that the residents of New Jersey have made this past year. By issuing a tax on the #microtransactions produced by daily trading, we can pass more financial savings to individuals and raise millions in new state revenue. pic.twitter.com/rZTE5YDiyo
— Steve Sweeney (@NJSenatePres) October 10, 2020
And last week, Murphy said he continues to be intrigued by the idea.
“I continue to like it, and we’re continuing to take it seriously,” he said.
Both Murphy and Sweeney have suggested this could be a temporary tax — which, of course, is what they said about the rise in the Corporation Business Tax, a promise they were forced to renege on.
No one could take them seriously on this, either. After all, where is the state going to make up that supposed $10 billion years from now?
This, however, has never been about the data. It’s about how much the state can tax the business community before it leaves. Everyone has a tipping point. Could this be it for New Jersey?