New Jersey Governor Phil Murphy favors using revenue from a proposed tax on electronic Wall Street trading to expand his social-justice agenda and shore up the state’s fiscal health, according to senior administration officials.
Any proceeds from levies on hundreds of millions of trades processed at data farms inside the state wouldn’t be scored for the fiscal year that starts Oct. 1. But the bonanza from the first-of-its-kind state tax could ultimately become a long-term annual source of revenue for New Jersey.
And it would boost progressive appeal for Murphy, 63, a Democrat and retired Goldman Sachs Group Inc. senior director, if he campaigns, as expected, for a second term next year.
The Murphy administration plans to borrow $4 billion to cover pandemic-related revenue gaps and institute a millionaire’s tax for the fiscal year that starts in October. For future budgets, an electronic-trading levy could equal proceeds from the sales and use tax, the state’s second-biggest source of revenue.
A bill sponsored by Assemblyman John McKeon, a Democrat, calls for a quarter-of-a-cent tax on stocks, options, futures and swaps trading via northern New Jersey electronic data centers. McKeon, in an interview Wednesday, said the state could collect $10 billion annually from entities engaged in at least 10,000 transactions per year.
Exchange Doubts
Still, some industry executives said such a tax would raise nowhere near such projections, predicting it could undermine the functioning of markets and New Jersey’s standing as the center of U.S. financial-data processing. Servers are warehoused in Mahwah, Secaucus, Carteret and other locations.
“We have data centers in various states and the ability to move trading outside of New Jersey in a business day,” said Hope Jarkowski, co-head of government affairs for New York Stock Exchange parent Intercontinental Exchange Inc. in Washington.
The Assembly bill hasn’t had a hearing scheduled, and neither has an identical version, sponsored by Senate President Steve Sweeney, New Jersey’s highest-ranking state lawmaker. But at a Monday news conference, Murphy said the concept “is something we like a lot,” although fraught with litigation risk.
The governor sees the potential windfall as a shot to expand what he calls his “stronger, fairer” agenda to close New Jersey’s wealth gap, according to the administration officials, who spoke on condition of anonymity because the legislation is in early stages. Murphy has enacted free county college tuition for undocumented immigrants and expanded no-cost pre-kindergarten in needy communities.
Indebted State
New Jersey, one of the most indebted U.S. states, has unfunded pension and benefits obligations of well over $200 billion. The officials said some revenue ideally would go toward shoring up the state’s finances. But they also said the trades tax would help expand educational programs and finance new initiatives to boost middle- and low-income earners.