New Jersey Financial Transaction Tax Resurrected

After dying in 2020, a proposal to tax financial transactions—including those in 401(k) plans—is once again before the Garden State’s legislature. 

During the start of the New Jersey legislative session this week, Assemblyman John McKeon (D-Essex and Morris) reintroduced legislation (A1757) on Jan. 11 to impose a tax on high-quantity processors of financial transactions. The tax would be $0.0025 for each financial transaction processed. 

High-quantity processors would be defined as persons or entities that process 10,000 or more financial transactions through electronic infrastructure located in New Jersey during the year. McKeon notes that there are reportedly billions of financial transactions processed daily, with many of those processed in New Jersey. 

But even though the tax would be levied on the processor, it could be passed along to the purchaser or seller, therefore raising billions of dollars in revenue annually for New Jersey, according to the bill’s summary. 

For purposes of the tax, financial transactions would be defined as those involving the purchase or sale of a financial security, which would include a futures contract, options contract, futures option contract, swap contract, credit default swap contract, derivative or share of stock in an entity. 

And like the previous version of the legislation, the bill as currently drafted does not make any exception for retirement plan investments, including participants in 401(k) plans and other plans that invest in the markets.

McKeon’s bill was the subject of an October 2020 hearing held by the New Jersey Assembly Financial Institutions and Insurance Committee, where witnesses voiced strong opposition to the proposed FTT. The American Retirement Association has decried proposed financial transaction taxes, calling them “a tax on the retirement savings of hard-working Americans.” In addition, numerous studies have shown that an FTT would be detrimental to retirement savers and would harm the economy. 

Additionally, the NYSE and NASDAQ, both of which have financial data centers in New Jersey, have threatened to leave the state if the proposal were to be enacted, contending that they have a fiduciary responsibility to do so.