New York state lawmakers on Tuesday are set to weigh a variety of Democratic revenue-raising proposals for a budget deal to help close the state’s $15 billion deficit.
At the top of the list: a bill to resurrect a state tax on stock trades. The levy, last used in 1981, has gained a strong political foothold in the Assembly — and even lawmakers in Washington are reviving debate over a financial transaction tax. Wall Street heavyweights are doing everything they can to extinguish both fronts.
Financial titans like the Securities Industry and Financial Markets Association, whose members include Goldman Sachs, JP Morgan Chase & Co., and Fidelity Investments, along with the Business Council of New York State and the Partnerships for New York City have been hopping on Zoom calls urging state lawmakers to back off from the tax measure, arguing that it would only force Wall Street to flee lower Manhattan permanently for tax-friendly havens like Texas and Florida.
“This isn’t a zero-sum game,” said Kathryn Wylde, president and CEO of Partnership for New York City, an association of chief executives. “We will go into the hole deeper. You will precipitate a depression in New York if these various taxes pass. The fallacy in all of this is that the wealth creators are stuck in New York when the world is competing for them to relocate.”
Wall Street lobbyists have been ripping a page from old sales playbooks, lining up lobbyists and public relations firms to stop the tax, which they say would decrease trading activity, lower earnings, and harm average Americans saving for retirement.
“There’s a principle in sales: Fear, uncertainty and doubt,” Assemblymember Phil Steck (D), lead sponsor of a bill that would repeal a tax rebate on financial transactions,said in an interview. “That’s what they do, and there are people vulnerable to that for sure.”
A 1906 tax was never taken off the books, but in 1981 lawmakers instituted a rebate of it—effectively killing the tax. Steck’s measure, along with a companion Senate bill sponsored by Sen. James Sanders (D), would repeal the deduction.
Bills Under Consideration
The stock transfer tax is one of six tax proposals on the table for a budget deal. Tuesday’s jointhearing by the Senate Finance and Assembly Ways and Means committees will be a first look at whether any of them have enough support to win a place in the fiscal package policy makers must reach by March 30.
Rank-and-file Democratic lawmakers are eager to push a number of progressive plans even if Washington delivers on a federal aid package, pointing to long-term fiscal issues facing the state.
“We get new cosponsors every day,” said Steck, who aims to to win at least five more signatures atop the more than 50 Assembly members already backing the legislation. He and Sanders have been working around the clock to win more cosponsors to pressure Assembly Speaker Carl Heastie and Senate Majority Leader Andrea Stewart-Cousins to include the measure.
“Speaker Heastie has said that supply has to equal demand, so in terms of any proposal nothing is off the table,” Kerri Biche, a spokeswoman for the speaker, said in an email.
A competing bill by state Sen. Julia Salazar (D) and Assemblymember Yuh-Line Niou would go further. That measure, S3890 would tax trading activities at investment banks and hedge funds and tax transfers of stocks, bonds and derivatives.
“It tells me that people are accepting of the concept even if they may have disagreement on how best to implement it,” Steck said.
Other revenue-raising proposals that have been introduced include a new progressive income tax brackets, a “mark-to-market” tax and a measure to offset business income tax benefits of the 2017 federal tax law. Combined, they would raise an estimated $50 billion in new revenue in 2021.
Lawmakers hope to avoid cutting $2 billion in school funding, $600 million in Medicaid funding and $900 million in other cost reductions proposed in Gov. Andrew Cuomo’s budget in January.
Besides warning of massive financial-business departures if New York revived the transfer tax, opponents question whether the measure would even apply in an environment that has been transformed since the 1980s.
“The world has changed significantly,” said Ken Pokalsky, vice president of government affairs for the Business Council of New York, referring to electronic trading. “There is significant gray area whether a transaction would be subject to the tax or not.”
Financial sector interests also stressed that the industry is ready to move in the face of any additional tax burdens.
Virtu Financial Inc. and others have threatened to leave New York if lawmakers implement a stock-transfer tax. The New York Stock Exchange warned political leaders against it.
“Any friction at all is going to mean you move the transactions out of the tax jurisdiction—period,” said Wylde. “So, they’re not going to collect any money at all.”
“They are pushing back against it mightily, said John Samuelsen, president of the Transport Workers Union Local 100, one of the largest local unions representing the Metropolitan Transportation Authority, which has been working with Senate Democrats Timothy Kennedy and Leroy Comrie to push the bill forward.
“We have to stop being fearful how the rich are going to react,” Samuelsen said. “We can’t just cut bait and run because rich people threaten us.”
A transfer tax, or financial transactions tax—long sought by progressives and Wall Street reformers—is getting some notable attention in Washington, too.
Last week, California Democrat Maxine Waters, who chairs the House Financial Services Committee, threw her support behind such a tax during a hearing on the GameStop Corp. controversy.
Liberal Democrats like Sen. Elizabeth Warren of Massachusetts and Bernie Sanders of Vermont have pushed the levy for years, arguing that it could curb the kind of speculative betting that has led to chaotic market swings and would help finance programs like free college tuition.
A bill introduced by Oregon Democrat Peter DeFazio, which proposes to put a 10-cent fee on every $100 of securities traded, has 13 co-sponsors.
New York City Mayor Bill de Blasio said at a Feb. 11 budget hearing that he opposed a state tax on stock trades, arguing it would make the state uncompetitive. But action by Congress would avoid that impact, he said. Cuomo himself didn’t include the measure in his budget plan.
The plan has its detractors, however. Some lawmakers are questioning the tax’s impact on the New York State Retirement Fund, which is the public employees’ pension fund. Steck and union leaders have sought to stress to members that there would be no impact on pension funds and that the proposed repeal of the rebate wouldn’t cause an exodus.
Top of mind for lawmakers is also how much aid they can expect from Washington. House Speaker Nancy Pelosi has floated the possibility that New York could get as much as $50 billion as part of President Joe Biden’s $1.9 trillion relief package, but negotiations are ongoing.
Financial services executives argue that with the influx of cash from the government, the need to pursue revenue raisers would be greatly diminished, and they dismiss immediate concern about long-term structural deficit issues.
“That’s two years from now,” said Pokalsky. “You don’t know how strong the economy is coming back. You don’t know how strong state tax revenue is coming back. You don’t know if the state will need new revenue measures in fiscal 2024.”
But tax proponents are resisting efforts to postpone consideration of a tax.
“My experience is that they are not willing to give anything,” said Gloria Middleton, President of the Communication Workers of American Local 1180. “Everybody needs to pay their fair share. We’re not asking for much.”
Dozens of organizations sent a letter to legislative leaders in support of the measure ahead of the hearing.
“Wall Street is the only industry that has emerged unscathed from this pandemic, and to continue to rebate its tax, rather than fund schools, hospitals, and the social safety net, is a grave injustice,” a coalition of labor unions, healthcare institutions, environmental groups and community activists said in a letter.