No matter how much money the federal government provides to New York, the state will have a structural deficit unless it either cuts billions of dollars in spending or raises revenue.
Among the taxes that majority Democrats in both houses are considering is the Stock Transfer Tax, which is a sales tax on stock trades that advocates say could raise around $13 billion every year.
A little history: The tax is over 100 years old; it existed in New York from 1905 to 1981.
Legislation written by Assemblyman Phil Steck (D-Colonie), would levy a $0.05 tax on every $100 of stock purchases, capped at $350.
“So you don’t pay any more if the price is over $350,” said Steck.
Capital Tonight discussed the pros and cons of the Stock Transfer Tax with advocate 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’s no way we can meet our infrastructure needs, including being fossil-fuel free without the money raised by the Stock Transfer Tax,” Stock explained.
Pokalsky pointed to the relief package that Congress is currently debating, saying it would go a long way to addressing the state’s budget issues.
“Even if revenues are needed for next year’s budget or the year after, we believe there are less economically damaging options out there, including, for example, the temporary personal income tax increase that was in the executive budget as well.”
Indeed, the Cuomo administration doesn’t appear too keen on the tax. Last month, Budget Director Robert Mujica told reporters, “If we increase the tax like that, you mobilize people, potentially just move your transactions and your servers to another part of the country where those taxes don’t exist.”
As Pokalsky mentioned, one contingency in Governor Cuomo’s executive budget is a temporary hike on the personal income tax.
But Steck dismissed the idea, saying “I think the stock transfer tax is better. This is a lot more money.”
The Business Council’s Ken Pokalsky said the Stock Transfer tax could potentially hurt the middle class, not just high-income earners.
“Certainly, it affects wealthy investors on their own portfolios. But it will also hit pensions, 401Ks and other savings vehicles that invest in equities,” he said.
But groups that are advocating for the tax take issue with that conclusion, saying that the vast majority of trades are high frequency trades, which is not the kind of activity that occurs in longer term pension and retirement investments.
But Pokalsky also says he’s worried that the Stock Transfer tax could slow down the state’s economic engine, which, for decades, has been the securities industry.
“The state remains the nation’s center for financial services, but we know that that industry has been slipping away over the years,” he said. “We know that the industry has lost over 20,000 jobs in the securities-brokerage industries in last 10 years.”
Steck acknowledged the job losses, but said they have to do with computerization.
“The industry is down 26% in employment…while it’s at its most profitable point ever,” he said. “The financial industry share of corporate profits has risen from 10% to 33% yet employment is down, for reasons like computerization.”
The two also differed on whether Wall Street would move from New York State if such a tax were implemented. According to an op-ed in the Wall Street Journal earlier this week penned by NYSE President Stacey Cunningham, there’s not much debate over what Wall Street will do if lawmakers approve this tax. She warned that there could be “unintended consequences” of imposing a transfer tax on stock sales.
“History’s lesson is clear: If you try to squeeze more revenue from financial firms, the business goes elsewhere,” she said.
Advocates for education, health care and local governments argue that if the state doesn’t tax the rich, one way or another, the state may not recover.