New Jersey’s Transaction Tax Grab

by Peter C. Earle
The American Institute for Economic Research

New Jersey is presently facing a multi-billion dollar budget shortfall. And with tax receipts falling far short of the spending aspirations of state lawmakers, Trenton is hurtling toward incorporating a slate of new taxes in the 2021 budget, including one on financial market transactions. It’s an idea which has been around for some time, surfacing most recently in 2019 among candidates vying for the Democratic Party Presidential nomination.

In this case, the specific targets are the New Jersey-based data centers of New York City securities exchanges and other financial markets: massive server farms through which hundreds of billions of dollars worth of transactions and market data travel each day. The working proposal is that all firms executing at least 10,000 trades electronically per year – 400 per day, a threshold that ensnares even the smallest of firms – would be subject to a ¼ of one cent ($0.0025) per transaction tax. It’s a small number, but one that could add up to as much as $10 billion per year.

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