Relates to rebates on stock transfer tax paid; decreases amount to sixty percent

BILL NUMBER:S6901

Title of bill

An act to amend the tax law, in relation to rebates on stock transfer tax paid

General purpose of bill

Since at least 1915, New York has imposed a tax on the sale of securities. Nonetheless, the securities industry flourished in the State. The State began rebating the tax in 1979 so that it is now 100% rebated back to the industry. As explained below, the 100% rebate is no longer justifiable.

Summary of provisions

Section 1 of the bill amends subdivision 1 of section 280-a of the tax law, as amended by chapter 578 of the laws of 1981, by providing for a rebate of 60% of the tax collected. Accordingly, $6.4 billion in revenue would be raised.

Section 2 of the bill sets forth an immediate effective date.

Justification

The tax was essentially repealed as part of the over-exuberance about stimulating the economy through tax cuts and unleashing the financial sector. As Nobel Prize-winning economist Joseph Stiglitz, who has written in favor of the tax, explained in 2013, that economic philosophy encouraged speculation, did not promote investment, led to economic collapse, and simply transferred wealth from the middle class to the top of the economic spectrum, increasing unemployment and income inequality to unprecedented levels. Stiglitz observed: "A major change occurred in markets around the turn of this century: most trading (some 61 percent in 2009, 53 percent in 2010) on the stock exchange was done by computers trading with other computers, using certain algorithms. Offers to buy and sell were based not on market research, on informed views about the prospects of, say, steel or the efficiency of a particular steel company, but rather in extracting information from the pattern of prices and trades, and on whatever other information a computer could absorb and process on the fly.... The financial sector has imposed enormous externalities (costs it does not pay for) on the rest of society. The total costs of the financial crisis for which they bear significant responsibility is in the trillions of dollars. Flash trading and other speculation may create volatility, but not really create value: the overall efficiency of the market economy may even be reduced. Through our bailouts and a myriad of hidden subsidies, we have in fact been effectively subsidizing the financial sector." Other countries have imposed this tax without any reduction in productivity or efficiency, including Germany, the leading economy in Europe, England, Japan, and Australia, to name only a few. The revenue is needed to fund rebuilding our deteriorating infrastructure, scientific research, and education, all of which have proven historically to cause economic growth, raise the earning power of the middle class, which stimulates the economy, and raise many individuals from the poor into the middle class.

Prior legislative history

None.

Fiscal implications for state and local governments

None other than indicated above.

Effective date

This act shall take effect immediately.