Collect the Stock Transfer Tax: $16 Billion This Year Alone
by Gene Grabiner
New York State collects a very small tax on each stock transfer, but then instantly rebates the tax, now in excess of $16 billion annually, back to Wall Street. The tax is hardly noticeable for anyone who invests in Wall Street, primarily hitting those who treat the stock market as a casino, making hundreds of trades daily.
The stock transfer tax doesn’t impact upon people making serious long term investments.
A stock transfer tax was used by the federal government to help pay for the Civil War, the Spanish-American War, and World War I. New York adopted one of its own in 1905 (New York Tax Law § 270.1), despite threats from the New York Stock Exchange that if passed it would instantly depart to New Jersey.
As it stands, the tax is up to .05 percent per share, for a maximum of $350 per transaction. Obviously, we’re talking about frequent moves of large blocks of stock, such as Wall Street speculators commonly engage in.
The London Stock Exchange collects a hefty stock transfer tax, far greater than what is here contemplated. Yet, the London Exchange continues to flourish mightily. Germany, Switzerland, Hong Kong, Singapore, and France also have stock transfer taxes.
A 2003 poll commissioned by the AFL-CIO showed that by 63 percent to 24 percent, New Yorkers favored re-instituting a stock transfer tax of one or two cents per share on stocks traded on the New York Stock Exchange.
It cannot be claimed that if New York collected the stock transfer tax, the New York Stock Exchange, AMEX, and NASDAQ would flee into cyberspace. After all, New York is increasingly effective in collecting state taxes on purchases made out-of-state over the net.
While the New York stock transfer tax has been in effect since 1905, since 1981, the money is handed right back to the brokers who paid it in the form of a 100 percent rebate. The state collects billions in stock transfer taxes and instantly rebates them all back to Wall Street. The broker fills out a return form (MT-650), submits payment to the state, and the state credits the money immediately back to the broker.
In order to discourage Wall Street speculation, consideration should be given to tying the underlying tax rate to a person’s trading volume: The lower the trading volume, the lower the tax. This would reduce the volatility that caused many of Wall Street’s and America’s problems in recent years.
This year, the stock transfer tax will amount to about $16 billion. Retaining this tax revenue will erase the state’s entire deficit, restore major pending cuts in essential services, prevent the layoffs of tens of thousands of workers in New York, and generate revenue surpluses in succeeding years.
Gene Grabiner, Buffalo
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