The American Retirement Association, along with 30 other organizations, wrote to New York State leaders, criticizing a proposal to tax stock transfers as a misguided attempt to address the state’s budget deficit.
“While some see this as a tax on the securities industry itself, it is actually a tax on working families saving for retirement and college, pension funds that secure retirement for millions, as well as many individual investors, foundations and endowments,” states the Feb. 4 letters to Gov. Andrew Cuomo (D), New York House Speaker Carl Heastie, and Senate Majority Leader Andrea Stewart-Cousins.
Representing more than 544,000 workers, other signers include Nasdaq Inc., the New York Stock Exchange, SIFMA, Investment Company Institute and the SPARK Institute.
New York State eliminated collection of an STT in 1981 in response to market globalization and significant technological changes affecting market transactions, according to the letter. But pending before the New York State legislature are bills that include provisions that would effectively reinstate it, as well as expand the types of transactions that would be subject to the tax to help close the state’s budget deficit.
As an example of the impact an STT could have, the group cites a 2020 study by Modern Markets Initiative estimating that a 10-basis point federally imposed FTT would cost:
- the New York State Common Retirement Fund more than $30 billion over 30 years;
- New York 529 college saving plan participants more than $117 million over 30 years; and
- individual investors in New York $1,677 a year and $67,077 over 40 years.
Although the mechanics of a state tax may differ from a federal tax, the impact of a financial transaction tax burden would ultimately be passed on to investors of all income levels, the letter emphasizes.
Easy to Relocate
The group also warns that in an age of electronic trading and telecommuting, there are few barriers to relocation. “Faced with an STT in New York State, firms are likely to relocate trading activity outside of the State to offer a better price for their clients, taking jobs and related economic activity with them,” the letter states.
Moreover, it notes that if New York imposes any STT, firms that process trades in the state could risk potential non-compliance with FINRA’s “best execution” rule that requires broker-dealers to find the most favorable price for customers when buying and selling securities. “No other state in the country imposes an STT, and increasingly we are seeing broker-dealer activities move to other states,” the group advises.
Citing data by the New York State Comptroller, the letter observes that, from 2008 to 2019, New York State saw its securities jobs fall by 20,000, and its share of U.S. securities brokerage jobs migrate from 27% to just 21%.
A similar effort to impose an FTT took place last fall by the New Jersey state legislature, but that also received pushback from the industry, with the NYSE and Nasdaq threatening to leave the state, as well as from Republican members of Congress who introduced legislation to prohibit states and local municipalities from imposing an FTT on certain securities industry participants.
Last month, the Modern Markets Initiative released an updated version of its study showing that an FTT could result in forgone savings of $45,000 to $65,000 over the lifetime of a 401(k) account or the equivalent of delaying the average individual’s retirement by approximately two years.
- Log in to post comments