7 Once this maximum is met, the cost per trade in taxes decreases proportionally. There is a maximum tax of $350 per transaction if the trade is of the same class of stock from the same issuer on the same day. (See Table 1.) A stock traded for $1,000 per share would incur a tax of 0.005 percent. The tax (before rebates) imposes a greater liability on stocks of smaller value, with a $1 stock subject to a 1.25 percent tax on every sale, whereas a $20 stock is subject to a tax of 0.3 percent. The STT is calculated on the dollar value of the stock being transferred, with a minimum tax of 1.25 cents per share on shares costing less than $5, and a maximum tax of 5 cents per share on shares costing more than $20. State tax policy changes, such as instituting the STT, would hasten New York’s smaller share of securities employment. New York is highly dependent on the securities industry, which accounted for approximately 18 percent of State tax collections and 6 percent of City tax collections in fiscal year 2020. Despite the importance of the industry to New York, there is evidence that New York is losing its dominance in the sector: between 19 New York City’s share of national securities employment decreased from 33 percent to 19 percent. Importance of the Securities Industry to New York The tax on trades flowing through the New York Stock Exchange and NASDAQ is electronically administered by a third-party entity and no money changes hands. To pay, people purchase physical stamps from the State Department of Taxation and Finance, affix the stamps to the bill of sale, cancel the tax stamps so they cannot be used again, and then request a rebate from the Tax Department. 4Ĭertain small transactions made by individuals, like buying shares in a cooperative housing corporation as part of buying an apartment, represent a very small share of trades subject to the STT. Any sale or transfer of stock, agreements to sell stock, memoranda of sales of stock, certificates of stock, certificates of rights to stock, certificates of interest in property or accumulations, certificates of deposit to purchase a stock, and certificates of interest in business conducted by trustees, or any trade involving shares in corporations or partnerships that occurs in New York State is subject to the STT. The vast majority of transactions are simply recorded and no tax is collected. Since then, most potential taxpayers have neither had to pay the tax nor await a refund. Beginning on October 1, 1979, the State returned 30 percent of the tax through a rebate, and two years later, on October 1, 1981, effectively eliminated the tax by increasing the rebate to 100 percent. Later, lawmakers increased the amount collected, but by the late 1970s, the tax had fallen out of favor. New York’s STT, a type of a financial transaction tax (FTT) levied on the trade of stocks, originally took effect in 1905. Policymakers should leave the STT dormant and find alternative ways to fill the budget gap. While tax avoidance could yield disappointing revenue on the newly reinstated tax, relocation of securities industry jobs outside of New York would harm the State’s employment opportunities and tax collections. 2 In fact, the State would likely amass even less, since firms might avoid the tax by using new technology or relocating the trading portion of their businesses outside New York. The record from fiscal year 2020, however, shows collecting the STT this past year would only have yielded $4 billion, just a third of advocates’ estimate. Both publically traded companies and anyone in New York who saves money in a retirement or college savings fund would feel the impact.Īdvocates claim the tax could yield up to $13 billion in annual revenue, based on data from past years. If the rebate were eliminated, essentially putting the tax back into effect, New York would become the only state to impose such a tax on the sale and transfer of stock. 1 In fact, New York has had a stock transfer tax for 115 years, but it has been effectively dormant for the last 40 because everyone who pays the STT receives a full refund. Some policymakers and advocates have advocated reinstating the stock transfer tax (STT) as one way to raise more money for the State. Next year, the gap is expected to grow to $17 billion. This year, New York State faces a $8 billion budget gap.
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