Of the many taxes implemented by activists in New York City, the share transfer tax is the most intriguing. It is basically a sales tax on stock purchases. And this is nothing new.
According to various sources, the tax was first imposed in New York in 1909 at the state level. It’s still on the books, but refunded to the taxpayer.
Calls for the reinstatement of the tax are not new either. The latest comes in the form of a bill sponsored by Senate Banking Committee Chairman James Sanders and Assembly Member Phil Steck.
A look at past opposition to the reinstatement of the tax will give you an idea of where the pushback will come from.
In 2004, following the economic devastation New York City faced following the 9/11 attacks, the New York City Partnership, a leading business organization, released a brief on the tax . The brief states that “a tax on stock transfers would increase transaction costs and reduce the volume traded on the stock exchanges.”
But with the disappearance of a fifth of state revenues and a four-year deficit of around $ 61 billion, calls for the tax to be reinstated are growing.
Michael Kink, executive director of the Strong Economy for All Coalition is one of those calling for his reinstatement.
“For 75 years, we have raised billions and billions of dollars with this tax. This is the money that funded SUNY. It was the money that funded CUNY. It was money that funded Mitchell Lama’s housing, ”Kink said. “All the good things that were built in mid-century New York were funded in large part by this little sales tax on Wall Street stock transactions.”
But the tax is met with strong opposition. Wall Street banks and brokers will most certainly be pushing against this. All in all, Wall Street revenues are responsible for 17% of state tax revenues.
And there’s more. Dave Friedfel, director of state studies at the Citizens Budget Commission, told Spectrum News that in the age of the mobile office, there is no reason transactions have to be conducted in New York City.
“Transactions can be initiated anywhere in the world, they don’t need to be processed in New York. By increasing the costs of doing business in New York, it will make New York merchants less competitive, ”he said. “If a business has merchants in New York and other states and can process cheaper transactions outside of New York, why would it process those transactions in New York? “
Friedfel also says that it is difficult to estimate the value of the tax because the impact on behavior is unknown. He believes the value of the tax may be lower than activists have estimated.
“According to the most recent report from the State Department of Taxation and Finance, the state ‘collected’ $ 4 billion in taxes on stock transfers in fiscal year 2020,” he said. -he declares.
But no one really paid attention to the number because the state hasn’t collected the tax for decades.
Finally, Friedfel warns, this tax will not only impact wealthy stock traders, but anyone with a 401k savings plan or college savings plan.
On his website, the bill’s sponsor, MP Phil Steck, lists various reasons why the share transfer tax should be introduced. On the list, it responds to Friedfel’s concerns about stocks traded outside New York.
“A transaction does not have to take place in New York to be taxable here,” read a letter posted on the official Steck Assembly webpage. “The Supreme Court of the United States ruled because it had to adapt the law to Internet sales. ”
Friedfel is not so sure.
“I don’t know if it’s 100% clear that this is a taxable event if the two entities making the transaction are located outside of New York City,” Friedfel said. “If they were taxable, why would they still go to New York? “
Michael Kink of Stronger for All says the bill can be adapted in a number of ways. For example, this could exclude stocks bought by mutual funds.
“I think there are ways to do it if you don’t want to do it all,” Kink said. “You could focus on the wealthiest people who transact the most volume. “