No matter how much money the federal government provides to New York City, the state will have a structural deficit unless it cuts billions of dollars in spending or increases its revenue.
Among the taxes that majority Democrats in both chambers are considering is the share transfer tax, which is a sales tax on stock transactions that advocates say could bring in around $ 13 billion each year.
A bit of history: The tax is over 100 years old; it existed in New York from 1905 to 1981.
Legislation drafted by MP Phil Steck (D-Colony) would levy a tax of $ 0.05 on every $ 100 of stock purchases, capped at $ 350.
“So you don’t pay anymore if the price is over $ 350,” Steck said.
Capital tonight discussed the pros and cons of the share transfer tax with attorney Steck and opponent Ken Pokalsky, vice president of the Business Council of New York.
The two disagreed on multiple issues, including whether such a lucrative tax was needed.
“There is no way to meet our infrastructure needs, including being fossil-fuel-free without the money raised by the tax on stock transfers,” Stock explained.
Pokalsky highlighted the back-up plan that Congress is currently debating, saying it would go a long way in solving the state’s budget problems.
“Even though income is needed for next year’s budget or the following year, we believe there are less economically damaging options, including, for example, the temporary tax increase. on personal income which was also included in the executive’s budget. “
Indeed, the Cuomo administration does not seem too passionate about the tax. Last month, Budget Director Robert Mujica told reporters: “If we raise the tax like that, you mobilize people, you potentially move your transactions and your servers to another part of the country where these taxes don’t. do not exist.
As Pokalsky mentioned, one contingency in Governor Cuomo’s executive budget is a temporary increase in personal income tax.
But Steck dismissed the idea, saying, “I think the share transfer tax is better. It’s a lot more money.
Ken Pokalsky, of the Business Council, said the share transfer tax could potentially hurt the middle class, not just high-income people.
“Certainly this affects high net worth investors in their own portfolios. But it will also affect pensions, 401Ks and other savings vehicles that invest in stocks, ”he said.
But groups advocating for the tax dispute this conclusion, saying the vast majority of transactions are high-frequency transactions, which is not the kind of activity that occurs in retirement and retirement investments. longer term.
But Pokalsky also says he’s worried the tax on stock transfers could slow down the state’s economic engine, which for decades has been the securities industry.
“The state remains the national center for financial services, but we know this industry has disappeared over the years,” he said. “We know that the industry has lost over 20,000 jobs in the securities brokerage industries over the past 10 years.”
Steck acknowledged the job losses, but said they were linked to computerization.
“The industry is down 26% in terms of employment… even though it is at its most profitable point ever,” he said. “The financial industry’s share of corporate profits has increased from 10% to 33%, but employment is declining, for reasons such as computerization. “
The two also differed over whether Wall Street would leave New York State if such a tax were implemented. According to a Wall Street Journal editorial published earlier this week by NYSE President Stacey Cunningham, there isn’t much debate about what Wall Street will do if lawmakers approve this tax. She warned that there could be “unintended consequences” of imposing a transfer tax on sales of shares.
“The lesson of history is clear: if you try to get more income from financial companies, the business will go elsewhere,” she said.
Advocates for education, health care and local government argue that if the state doesn’t tax the rich, somehow, the state might not recover.