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NJ Proposed Financial Transaction Tax Would Come at High Cost, Study Says

Government Affairs

A proposed financial transaction tax has not been enacted yet, and a recent study suggests that could save retirement plans in the Garden State billions of dollars.

A Case Study on the Effects of a Financial Transaction Tax on Savers in New Jersey,” an October 2020 study by Gourprabh, University of California, Los Angeles, for the Modern Markets Initiative, called the costs that an FTT would impose on millions of people in New Jersey “staggering.” 

The study says that the impact of the proposed tax would include the following:

 

Group Impact of FTT on trading with 10 basis point equities, 10 basis points bonds, 10 basis point derivatives Impact of FTT on trading with 50 basis point equities, 10 basis points bonds, 0.5 basis point derivatives Impact of FTT on trading with two basis points across asset classes increasing incrementally over five years to 10 basis points ongoing
Individual investors and 401(k) plan holders, after 40 years $8.07 billion $390 million $193.42 million
New Jersey Division of Pensions & Benefits, after 30 years $8.15 billion $2.35 billion $2.28 billion
NJBEST 529 College Savings Plan, after 30 years $556.94 million $216.32 million $206.7 million
New Jersey residents participating in the NJ ABLE plan, after 30 years $383.35 million $76.67 million $74.76 million

 

Assemblyman John McKeon (D-Essex) had proposed an FTT in legislation he introduced on July 9, A4402. The legislation would impose a tax on high-quantity processors of financial transactions at $0.0025 per transaction. On Sept. 14, Sen. Stephen Sweeney (D-West Deptford) introduced the Senate version, S. 2902. Both are currently before committees: the Assembly Financial Institutions and Insurance Committee and the Senate Budget and Appropriations Committee, respectively. And while an FTT had been part of talks concerning the fiscal year 2021 state budget, it was dropped in the $32 billion budget proposal. Still, Gov. Phil Murphy (D) said at a Sept. 17 news conference that it’s still a possibility an FTT may be pursued in the future.