February 4, 2021

SIFMA Opposes New York State Stock Transaction Tax

Steven Lofchie Commentary by Steven Lofchie

In a letter to New York State officials, SIFMA and 26 other organizations expressed opposition to "any form" of a New York State Stock Transaction Tax ("STT").

The letter was in response to four proposed bills that would modify Section 208-a ("Rebate for Stock Transfer Tax Paid; Penalty for False Claims") of the New York Consolidated Laws. New York State eliminated collection of the STT in 1981 through a 100% rebate of any tax imposed. Prior to repeal, an STT was imposed on the sale or transfer of a stock within New York State at a rate ranging from 1¼ to 5 cents per share. New York State Bills S1406, S270, A3353 and A3271 are currently in committee in the New York State Assembly and propose to either fully or partially repeal the rebate.

SIFMA warned that an STT would:

  • be passed on to the entire "financial ecosystem," essentially imposing a tax on public and private pensions and retirement funds, charitable organizations and small individual investors; and
  • incentivize firms to relocate their trading outside of New York, given that no other state imposes an STT. SIFMA cited the U.S. Bureau of Labor and Statistics in noting that "[f]rom 2008 to 2019, New York State saw its securities jobs fall by 20,000, and its share of U.S. securities brokerage jobs migrate from 27% to just 21%. . . . Since most trading is done electronically, there are few barriers to moving trading that currently takes place in New York State to a state without [an] STT."


According to the numbers cited in the letter, New York State's share of the financial services business dropped by over 25% in a six-year period. After that drop, the country was hit by a pandemic that (i) made New York City a far less attractive place to work (no restaurants, no theater) and (ii) made it clear that it was not necessary for many jobs to be performed in New York City (remote working). In light of those somewhat discouraging facts, the officials of New York State might wonder what they can do to maintain market share. Instead, they propose a tax that further damages the competitiveness of the State.

Perhaps the legislators that proposed bringing back the STT are thinking that the State was able to collect it back in 1981, and that worked fine. By way of point of reference, Amazon was founded in 1984. The NYSE started to go electronic in 1995. Business (taxation) models that worked in 1981 do not work today.

Unfortunately, New York State legislators seem to model their revenue projections on the basis that imposing additional costs, in the form of taxes or otherwise, does not change behavior or reduce the level of business. One imagines that legislators in other states will take the other side of that trade.

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