“The lower the volume of transactions, the lower the tax. This would help decrease the savage and speculative volatility that has caused so many problems on Wall Street and the United States in recent years.
Without any federal help, New York State will face austerity for the next four years or more. Governor Cuomo and some Albany lawmakers have suggested cutting all government spending by 20% as a solution. It means solving austerity by imposing more austerity!
The solution, however, is in our hands: it is the tax on share transfers. This small excise tax on stock market transactions amounts to a few cents per share payable by investors. It generated around $ 15 billion in 2010. And as stock market activity improves (post-Covid19), it is likely to generate many more billions in the years to come.
The New York Stock Transfer Tax has been in place since 1905, but since 1981 the money raised is 100% refunded to investors who pay it. At any time within two years of payment, the investor fills out a return form (MT-650), submits it to the state, and the state immediately credits the money to the investor. Now, Assembly Bill A7791 would end the refund, automatically crediting billions of dollars to the state’s general fund for the benefit of all New Yorkers. The tax can go up to 5 cents per share, for a sale of shares at $ 20 or more per share. Its impact is primarily on the frequent movements of large blocks of stocks, the type that Wall Street speculators commonly engage in.
In order to prevent or oppose Wall Street speculation, the underlying stock transfer tax rate must be tied to a person’s trading volume: the lower the trading volume, the higher the tax is low. This would help decrease the savage and speculative volatility that has caused so many problems on Wall Street and the United States in recent years.
Some Albany lawmakers want to wait and see if Washington is helping our state before doing anything to collect the share transfer tax. Yet the wait for federal aid has already left us hanging in the air. And many New York state residents now face eviction, foreclosure, homelessness, poor or no health care, and / or food insecurity due to the lack of federal aid in New York.
Other lawmakers fear that the collection of this tax will cause companies to flee our state, the 401K of workers to lose money, and the New York Stock Exchange to leave Manhattan. New York adopted this tax in 1905 (New York Tax Law § 270.1), despite threats from the New York Stock Exchange that it would immediately move to New Jersey. And during that time, the Stock Exchange never left New York. The London Stock Exchange collects a hefty tax on share transfers and, regardless, continues to thrive powerfully. Germany, Switzerland, Hong Kong, Singapore and France also have taxes on share transfers. It cannot seriously be argued that if New York collected the tax on stock transfers, the New York Stock Exchange, AMEX and NASDAQ would all flee into cyberspace. After all, stocks are already traded electronically, and New York is increasingly efficient in collecting state taxes on online purchases made out of state.
The pandemic and recession have already destroyed one in six small businesses. Given the business climate in the country, companies are unlikely to flee New York State. Since workers’ 401K accounts do not involve rampant and frequent casino-type Wall Street speculation, there is no reason to argue that the tax on stock transfers would make them lose money. Ending the rebate and placing the stock transfer tax in the state general fund for the benefit of all New Yorkers would build confidence in the social contract between our government and the people of New York. Equally important, it would demonstrate to the whole country that New York State’s elected officials are acting with integrity and are courageously prepared to prevent the losses that the Trump administration and the Republican-dominated Senate increasingly want. more, inflict on our righteous state.
Mary Ann Castle, Ph.D., is a senior partner at Planning Alternatives for Change. Gene Grabiner, Ph.D., is Professor Emeritus of the SUNY Distinguished Service.