An Assembly committee plans to discuss a major and controversial bill next week that would impose a tax on electronic stock trades processed in New Jersey, potentially generating billions of dollars in revenue for the state.
Monday’s hearing by the Assembly Financial Institutions and Insurance Committee comes as several stock exchanges have threatened to move their data centers in North and Central Jersey out of state if the Legislature and governor move forward with the tax.
The bill, which Assembly Democratic spokesperson Kevin McArdle said the committee will discuss but not vote on, is expected to be heavily amended before any vote, and will likely include changing the tax rate on transactions and making the tax temporary.
The original bill, NJ A4402 (20R), which Assemblyman John McKeon (D-Essex) introduced in July, would impose a quarter-cent tax on every financial transaction processed in New Jersey.
Democrats have hired Paul Hastings LLP, a Washington, D.C.-based law firm with expertise on the topic, to help design the proposal. An invoice from the firm shows it’s charged Senate Democrats $30,000 so far.
Background: New Jersey’s economic slowdown from the coronavirus pandemic has cratered some revenue sources, resulting in the state agreeing to borrow billions to fund the current budget.
Financial transaction taxes are nothing new, but the idea to apply them to New Jersey’s vast server farms was first proposed by the late congressional candidate David Applefield in an op-ed earlier this year. McKeon, who read the op-ed, introduced the bill the day after Applefield died.
The bill has since gained traction, with Gov. Phil Murphy and legislative leaders all indicating support for taxing electronic trades.
Impact: Monday’s hearing is the latest indication Democrats are serious about the proposal and did not drop it when they failed to reached an agreement on it ahead of the Fiscal Year 2021 budget.
Several exchanges, including the New York Stock Exchange and NASDAQ, have threatened to pull their servers out of New Jersey or conduct trades through systems elsewhere if the state enacts the tax. The NYSE even conducted a test out of Chicago to show it can use backup servers there for trades. Texas Gov. Greg Abbott is in discussions with NASDAQ about relocating its trading systems from New Jersey to the Dallas area, according to the Dallas Morning News.
It’s not clear how many jobs New Jersey would lose if the server farms relocate. Asked how many people are employed at its server facility in Mahwah, the NYSE declined to comment.
McKeon estimated his initial proposal would mean billions in revenue for the state, though it’s unclear how much would be generated once the bill is amended.
What’s next? Despite the threats, the plan still appears to enjoy widespread support among top New Jersey Democrats.
“It is time for #WallStreet to share in the sacrifices that the residents of New Jersey have made this past year,” Senate President Steve Sweeney tweeted Saturday. “By issuing a tax on the #microtransactions produced by daily trading, we can pass more financial savings to individuals and raise millions in new state revenue.”
The bill has not yet been amended, but it expected to be soon. McKeon, who chairs the Assembly Financial Institutions and Insurance Committee, acknowledged that the amount of the tax and its time frame will likely change under the amendments.
“It’s a consideration of refining what markets it will apply to and the actual sum of the microcent is, as well as for the time that it would be implemented,” he said in a phone interview. “The focus is on trying to dig our way out of the hole that was created by the pandemic as opposed to creating a new source of revenue for the long term.”