By Gene Grabiner
New York State remains in a fiscal crisis. Recently, Comptroller Thomas DiNapoli suggested that 2013-2014 state budget gimmickry will not necessarily overcome the problem. Property tax caps and public worker layoffs have only reduced, not enhanced, the necessary level of service delivery, infrastructure revitalization and jobs creation.
One way to secure funding for New York State is to collect and keep the stock transfer tax. This tax has been on the books since 1905. Sadly, since 1981, New York has collected billions in stock transfer taxes and then rebated 100 percent of it back to Wall Street. Any time within two years after payment of the tax to Albany, the broker can submit a form and the state immediately credits the money back to the broker. In 2010, this rebate exceeded $16 billion in give-backs to Wall Street.
The stock transfer tax doesn’t negatively affect serious long-term investors. It primarily affects those individual or institutional investors who play the stock market like a casino, making hundreds or tens of thousands of trades daily. The tax is up to 5 cents per share, for a maximum of $350 per transaction. Its impact is mostly on frequent moves of large blocks of stock in which Wall Street speculators commonly engage.
The London Stock Exchange collects a significant stock transfer tax and it continues to flourish. Germany, Switzerland, Hong Kong, Singapore and France also have stock transfer taxes. A 2003 AFL-CIO survey showed that by 63 percent to 24 percent, New Yorkers favored collecting and keeping a stock transfer tax of one or two cents per share.
It cannot be claimed that if New York collected and kept the stock transfer tax, the NYSE, AMEX and NASDAQ would all flee into cyberspace. After all, New York is increasingly effective in collecting sales taxes on purchases made out-of-state over the Internet.
In order to prevent damaging Wall Street speculation, the underlying stock transfer tax rate should be linked to trading volume: the lower the trading volume, the lower the tax. This would diminish the wild volatility that caused many of Wall Street’s and most of Americans’ problems in recent years. While in 2010, during the Great Recession, the stock transfer tax totaled roughly $16 billion, now it may be even greater. Keeping, not rebating, this tax revenue will erase New York’s deficit, restore spending cuts in essential services, restore thousands of workers to their jobs or create new jobs, and generate future revenue surpluses.
While there is talk in Washington of a national financial transactions tax, New York already has one. We can show the way. Readers should press their state legislators to ensure that Albany collects and keeps the stock transfer tax.
Gene Grabiner, Ph.D., is a SUNY distinguished service professor emeritus of social science at Erie Community College.