A coalition of financial institutions and trade groups including the New York Stock Exchange and Nasdaq are opposing a financial transactions tax that New Jersey legislators are considering to help close a growing budget gap.
The NYSE is even threatening to leave the state — it operates a data center in Mahwah — if the tax is enacted.
The New Jersey financial transactions tax would apply to entities that process 10,000 or more transactions through electronic infrastructure located in New Jersey, such as the NYSE and Nasdaq. The measure would impose a $0.0001 cent tax per transaction and sunset after two years, according to New Jersey Assemblyman John McKeon, who is sponsoring the tax bill. (A sister bill has been introduced in the state senate.)
The tax would raise $500 million a year for New Jersey or $1 billion over two years for the state before it sunsets.
McKeon had originally proposed a $0.0025 tax with no sunset provision but is amending the bill after considering opposition from financial industry representatives and the issues they have raised.
At Monday’s hearing of the Assembly’s Committee on Financial Institutions and Insurance Committee, chaired by McKeon, Hope Jarkowski, co-head of government affairs for the NYSE parent company Intercontinental Exchange, said the exchange is preparing to move out of state if the New Jersey financial transactions tax becomes law.
She recalled that the exchange has already conducted a test that temporarily moved its New Jersey data operations to its data center in Illinois from Sept. 28 to Oct. 2 in preparation for the possible tax. “Proximity to New York City is no longer relevant in today’s trading environment,” Jarkowski said.
How the Tax Could Backfire
Nasdaq’s Vice President for Global Government Relations Terry Campbell testified that the transaction tax would backfire and not provide the revenue that New Jersey hopes to collect because financial firms will avoid having trades executed through New Jersey data centers, including its own. He and others also noted that the increased costs for firms that continued to execute trades through New Jersey would be passed on to investors.
“The entire financial industry has been lowering their fees,” which has resulted in “millions more coming to the market,” said Joe Kinahan, chief market strategist at TD Ameritrade. “This proposal sends the opposite message than we’re sending.”